Breaking up HSBC: Ping An’s call to debate the future of Hong Kong’s largest bank raises vexing question if its value is greater than the sum of its parts

Name: HSBC’s break-up dilemma: why bank’s largest shareholder is pushing for change
Uploaded: 2022-05-07T02:00:24.000Z
Duration: 5 min 25 s
Description: HSBC’s break-up dilemma: why bank’s largest shareholder is pushing for change

Ping An, HSBC’s biggest shareholder, making push for change at the lender in latest example of investor strife

Asia is the bank’s biggest profit centre, but insiders say much of its revenue in parts of its Asian business originates outside the region

Reading Time:6 minutes

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Chad Brayin LondonandEnoch Yiu

Published: 10:00am, 7 May 2022Updated: 4:35pm, 18 May 2022

HSBC’s decision in 2020 to scrap dividends infuriated the bank’s legion of Hong Kong shareholders from retirees to pension funds who depend on regular payouts by the city’s largest currency-issuing bank for income.

One such retiree was Lo Chi-man, 71, a shareholder for 12 years who counted on the 6 per cent average dividend on his 50,000 shares to supplement his pension. He sold his stake when HSBC acceded to a call by the UK banking regulator to suspend payouts and conserve capital for the unfolding Covid-19 pandemic.

The cancellation – the first time in 20 years for the bank to miss a payment – sent HSBC’s shares plunging, wiping out US$15 billion in value over three days. Shareholders picketed the bank’s Central head office, demanding the reinstatement of dividends and to dock executive salaries for a year.

The episode, which abated after HSBC resumed payouts last year, was among several since 2012 that illustrated the myriad regulatory and geopolitical risks that HSBC faced across the 64 global markets it operated in. The bank, which marketed itself two decades ago as “the world’s local bank” and the global financier of East-West trade, often found itself in a web of geopolitical strife, especially as US-China relations deteriorated to their worst level in 40 years.

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

HSBC’s critics are now joined by the bank’s No. 1 shareholder and China’s biggest insurer Ping An Insurance Group, with a 9.2 per cent stake. The Shenzhen-based insurer is calling for a “debate” to shake up the bank – potentially spin off its Asian business – and unlock value for investors.

“We want shareholders to participate in the debate and to propose solutions for HSBC,” a Ping An spokesperson said this week, days after the bank reported a 28 per cent plunge in first-quarter profit. “Ping An supports all reforms and proposals from investors that can help HSBC’s operations and long-term growth.”

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