Ping An insists splitting HSBC would increase bank’s value | HSBC

HSBC’s largest shareholder, Ping An, has escalated a dispute with the bank, accusing executives of exaggerating the demise of the spin-off of its Asian operations. to a source close to the investor.

It comes after HSBC CEO Noel Quinn used an earnings announcement last week to defend the bank’s strategy and emphasize that its success depended on maintaining its global network.

Quinn has been under pressure since April when Ping An revived calls to separate HSBC’s profitable Asian operations from the rest of its London headquarters banking operations.

However, according to a source familiar with the investor’s views, Ping An has hit back at Quinn’s arguments by saying, “HSBC has merely emphasized and clearly exaggerated the drawbacks and challenges of divesting its Asia business, but made no mention. made of the enormous benefits and long-term value that a spin-off could create.”

It added that outside analysis had suggested that a spin-off would “generate additional market value of $25-35 billion” (£21-29 billion) and that the bank could deploy an additional $8 billion in capital that would otherwise be held to offset the risk in the rest of the business.

The investor also believes that the move would save money over time related to IT and headquarters costs.

While HSBC beat analysts’ estimates in the second quarter and reported flat pre-tax profits of $5 billion (£4.1 billion), Ping An is alleged to have claimed that “nearly all of its revenue growth relied on a phased, ephemeral and uncontrollable interest rate hike cycle”.

Higher interest rates — which have been raised in recent months in an effort to combat rising inflation — have allowed banks like HSBC to charge borrowers more for loans and mortgages, in turn increasing their net interest margin, which is an important metric. is for profitability and growth.

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While HSBC’s Asian operations remain more profitable than the rest of the bank, Ping An is also said to have expressed concerns about the state of its Asian business model, saying it is “inefficient and unable to compete with its peers”. The investor added that profits for the division had fallen over the past two years.

“The underperformance has not yet been fundamentally addressed and radical change is urgently needed,” said the source, reflecting investor views.

Ping An is among a number of investors unhappy with returns on investment, especially after HSBC canceled the dividend during the UK’s initial coronavirus lockdown and later recovered it to just half of its pre-pandemic levels. paid.

HSBC said it would not comment beyond what executives had already said during its second quarter results last week.

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