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HSBC top shareholder Ping An urges aggressive cost cuts, renews spin-off push

FILE PHOTO: Logo of HSBC is seen on its headquarters at the financial Central district in Hong Kong

By Selena Li

HONG KONG (Reuters) -HSBC Holdings' largest shareholder Ping An on Friday urged the lender to aggressively reduce costs by cutting jobs and divesting peripheral non-Asian businesses, the first such public call by the Chinese financial conglomerate.

The London-headquartered bank, which makes the bulk of its sales and profit in Asia, has been under pressure from Ping An Asset Management (Ping An AM), to explore options including listing its Asian business to boost returns.

Friday's statement marks Ping An AM's first public comments on the subject, three months after HSBC pushed back against separating its Asian operations saying such a move would mean a potential long-term hit to its credit rating, tax bill and operating costs.

Ping An AM, a wholly-owned unit of Ping An Insurance, said in the statement the cost cuts were "urgent and absolutely" needed for HSBC to improve performance.

Besides considering layoffs, the bank should also look at reducing the cost of its global headquarters, Ping An AM said, citing its chairman Huang Yong.

"We will support any initiatives including a spin-off that are conducive to improve HSBC's performance and value; we will consider any suggestions that will help HSBC improve its development and operation strategy," Ping An AM said.

HSBC said in a statement it had kept a tight grip on costs by driving greater efficiencies across the organisation.

"We remain on track to hit all of our financial targets, including a return on tangible equity of at least 12%, from 2023 onwards," it added.

The bank's shares were trading up 5%, rebounding from last week's slump after HSBC reported a 42% slide in third quarter profit and said its net interest income in 2023 would be less than previously forecast.

"The original suggestion that HSBC should look to separate part or all of its Asian business from the rest of the group was, in my view, dead on arrival," said Ian Gordon, banking analyst at Investec.

"That said, I continue to believe that Ping An can play a useful role in terms of holding HSBC management to account following more than a decade of underperformance."

Ping An AM urged the bank to consider measures to implement its pivot to Asia strategy, including reviewing its global resource allocation to focus on the region, and exit "sub-scale" peripheral markets outside Asia.

GEOPOLITICAL TENSIONS

The Chinese company also cast doubt on HSBC's "global finance and banking model", saying such a framework was no longer competitive and warned the lender of "cross-border systemic risks and geopolitical tensions".

"Just divesting a few small markets or businesses will not fundamentally solve these issues," the firm said.

With a view to increase returns, HSBC said last month it was considering selling its business in Canada, worth billions of dollars and one of the biggest international banking brands in the country.

Ping An's renewed push for HSBC spin-off comes nearly two weeks after it named Georges Elhedery as its new chief financial officer in a surprise move that puts him in pole position to eventually succeed Noel Quinn as CEO.

Elhedery will replace Ewen Stevenson, under whose financial leadership HSBC has been trying to improve profitability by exiting business and cutting costs, a task some questioned whether the successor would be most adept at.

In its statement, Ping An AM said it would not comment on HSBC's management, but added it believed the "criteria for evaluating the CEO of any company" should be his or her ability to drive good performance and long-term value for shareholders.

(Reporting by Selena Li in Hong Kong; additional reporting by Anirudh Saligrama in Bengaluru, Iain Withers and Lawrence White in London; Writing by Sumeet Chatterjee; Editing by Rashmi Aich and Emelia Sithole-Matarise)