HSBC overestimated risks of fallout in Asia, thinks Ping An, main shareholder – source

HONG KONG/LONDON, Aug 11 (Reuters) – Chinese insurer Ping An Insurance Group (601318.SS) believes HSBC (HSBA.L) has exaggerated the challenges and difficulties of the bank split, a source said. having direct knowledge of the thinking of the bank’s largest shareholder.

The bank came under pressure from Ping An in April to explore options including spinning off its core business in Asia to boost shareholder returns. Read more

Details of Ping An’s internal talks come after HSBC on August 1 pushed back on the Chinese investor’s proposals when it released its half-year results.

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HSBC said a breakup would mean a potential long-term impact on the bank’s credit rating, tax bill and operating costs, and pose immediate risks in the execution of any split or merger. Read more

Ping An declined to comment, while an HSBC spokesperson said the bank had nothing to add to comments made by its executives last week.

The detailed rebuttal as described by the source with knowledge of Ping An’s thinking represents the investor’s most detailed denial to date of HSBC’s strategy and signals Ping An’s intention to pursue the dispute.

While activist investors sometimes acquire a stake in a major bank and confront management over how it is run, it is unusual for a Chinese entity such as Ping An, whose major shareholders include state-backed entities, to take such a proactive stance.

Ping An believes a spin-off would generate $25 billion to $35 billion in additional market value and free up more than $8 billion in capital, the source said, citing an “external” analysis. The source declined to be identified due to the sensitivity of the issue.

Responding to HSBC’s argument that splitting its Asian business will lead to global synergies, the source said HSBC would remain a major shareholder in the Asian unit after the separation and the two parties could enter into cooperation agreements.

The row between HSBC and Ping An shows the challenges facing the British lender as it tries to navigate geopolitical tensions between the US, Britain and China amid criticism from Western lawmakers over the bank’s activities in Hong Kong.

HSBC chief executive Noel Quinn said on Aug. 1 that the bank’s dialogue with Ping An “has been purely around business issues”, without any political aspect.

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Reporting by Selena Li in Hong Kong and Lawrence White in London; Written by Sumeet Chatterjee; Editing by Kim Coghill

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