HSBC Holdings Plc is looking to fast-track its exit from non-core markets and deploy more funds in Asia as it rebuffs its biggest investor Ping An’s proposal to split the firm, two people aware of the issue said.
In April, Ping An Insurance Group Co of China Ltd called on the bank to look for options, including spinning off its Asia business, to unlock shareholder value.
HSBC had hired advisers including London-based merchant banker Robey Warshaw to assist on a review of its strategy but has not spoken on Ping An’s demands.
The outlines of its plan to push back, reported here for the first time, are the result of that review, the people mentioned above said.
A spokesperson for HSBC declined to comment. Ping An, which is China’s biggest insurance company, did not immediately respond to requests for comment.
HSBC Earnings On August 1
In its earnings announcement on August 1, HSBC is expected to argue that the bank’s future depends on its global network of clients and services, the sources said.
But it may outline how it will redouble efforts to meet previously announced goals to exit non-core businesses and shift more of its business to Asia.
That, in practice, could mean ditching more unprofitable clients in countries such as France and Germany, a third source said.
It may not mention Ping An by name or allude directly to calls for a breakup, one of the sources said, but by renewing a commitment to reallocate capital to Asia the lender will tacitly acknowledge it has fallen behind in those plans.
Further as an indication of HSBC’s commitment to Asia, the two sources said, HSBC Chief Executive Noel Quinn a few days ago flew to Hong Kong and has undergone the mandatory seven-day hotel quarantine to hold the board meeting at its Asian headquarters.
HSBC To speed Up Exits
Ping An’s call for a breakup of HSBC came against the backdrop of growing geopolitical tensions between the West and China, which led some analysts to consider that there were more than just financial forces at play behind the proposal.
Citing people inside Chinese state enterprises and HSBC, Reuters reported last year that Beijing had become disenchanted with the bank over sensitive legal and political issues, from China’s crackdown in Hong Kong to the US indictment of an executive at Chinese tech champion Huawei Technologies.
But HSBC shares have also languished and it halted dividends entirely in 2020 at the behest of British regulators who urged banks to conserve capital, which was both a source of frustration to Ping An and the bank’s Hong-Kong based individual shareholders.
Since then, it has restored payouts but the consensus estimate of a 2022 payout of 28 cents per ordinary share falls short of its historical payouts. HSBC’s shares have risen 2.5% since news of Ping An’s demands first emerged on April 29.
Refocus On Growth Markets
In February 2021, the bank announced efforts to have Asia account for 50% of the bank’s capital allocation in the medium to long term from 42% at the time.
The bank also said it will refocus its efforts on countries where it can grow, continuing a strategy of leaving non-core markets in recent years.
The bank is trying to exit Turkey, Armenia, Greece and Oman, Reuters reported in January 2020, but progress has been mixed.
While the lender announced the sale of its Greece business this year, and in Oman it is in talks to merge with local rival Sohar International Bank, little progress has been reported on the other disposals.
The bank is hoping accelerating its plans will help mollify Ping An, according to the sources.
HSBC could speed up exits from those countries, one of the sources said.
- Reuters with additional editing by Jim Pollard