HSBC has overstated the challenges and risks involved in proposed spin-off, says source

Name: HSBC’s break-up dilemma: why bank’s largest shareholder is pushing for change
Uploaded: 2022-08-11T12:04:14.000Z
Duration: 5 min 25 s
Description: HSBC’s break-up dilemma: why bank’s largest shareholder is pushing for change

A break-up of London-headquartered HSBC will generate US$25 billion to US$35 billion of value, says source familiar with Ping An’s thinking

Ping An believes the lender can find a solution to overcome the challenges relating to the spin-off

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HSBC reported a 61 per cent jump in second-quarter net profit to US$5.49 billion. Photo: Sam Tsang

Enoch YiuandChad Brayin London

Published: 8:04pm, 11 Aug 2022Updated: 9:10pm, 11 Aug 2022

HSBC’s biggest shareholder Ping An Insurance Group believes the bank’s executives have overstated the challenges and downside risks of a spin-off of its Asia business in public statements about the proposal, according to a person familiar with the insurer’s thinking.

Ping An, the largest insurer in China, claims an additional US$25 billion to US$35 billion in market value could be created by separating HSBC’s Asian operations from its businesses in the West and free up as much as US$8 billion in capital that the bank is required to hold as a so-called global systemically important bank, the person said.

The insurer also believes HSBC could save on headquarters and information technology (IT) costs by separating the businesses. HSBC spent about US$6 billion on its technology globally last year.

In an informal meeting with small shareholders in Hong Kong last week, HSBC’s top executives laid out 14 potential downsides and challenges of spinning off the business, including losing revenue from its international network and higher costs associated with creating a separate IT system for the carved-out business.

05:25

HSBC’s break-up dilemma: why bank’s largest shareholder is pushing for change

Ping An has not been convinced by arguments presented by HSBC CEO Noel Quinn and chairman Mark Tucker and believes the bank has failed to carry out an in-depth analysis of the benefits and value of spinning off the Asia business, the person said.

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