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Breaking up HSBC would unlock up to £29bn payday, says Chinese shareholder

·2-min read
HSBC China Hong Kong Ping An Shareholder
HSBC China Hong Kong Ping An Shareholder

The Chinese investor campaigning to break up HSBC believes a split would unlock as much as $35bn (£28.6bn) in value for shareholders.

Ping An, the Chinese insurance giant and HSBC’s largest shareholder, accused HSBC of “exaggerating” the challenges of spinning off its Asian business as it renewed calls for a split.

The insurer estimates that the change would unlock up to $35bn (£28.6bn) in value, release $8bn in capital requirements, and save on headquarter and infrastructure costs.

A source close to the insurer said: “HSBC only emphasised and clearly exaggerated the downsides and challenges of spinning off its Asia business, but did not mention the huge benefits and long-term value that a spin-off could create.”

It is not convinced by HSBC’s arguments against a proposed spin-off of its Asia operations, Bloomberg first reported.

The source close to Ping An said HSBC’s “underperformance” had not yet been "fundamentally addressed" and it was in urgent need of radical change.

Ping An launched the campaign to break up HSBC in April. The bank makes the bulk of its sales and profits in Asia but has corporate headquarters in London.

The insurer has argued that the bank should explore options to increase shareholder returns including listing its Asia business separately.

Last week, HSBC’s chairman Mark Tucker and chief executive Officer Noel Quinn said Ping An’s proposal was unworkable and posed a major risk.

HSBC has set out a 14-point list of reasons why changing the bank’s structure is a bad idea, ranging from the length of time it would take to the loss of direct access to US dollars. The bank estimates a break up would take as long as five years.

The bank has also brought in advisers from Goldman Sachs and Robey Warshaw to advise on its options as it tries to rebuff Ping An’s campaign.

Mr Quinn also warned that such a move would put Hong Kong’s place as a global financial hub at risk, with a break up of HSBC potentially having a “negative impact” on the former British colony.

HSBC has also rebutted demands for the bank to give Ping An a seat on its board of directors. Mr Quinn said it would be a “conflict of interest”. No other major shareholders have come out in favour of Ping An’s proposals.

HSBC declined to comment.

Last week, Mr Tucker confirmed at a fractious meeting with investors in Hong Kong it was modelling a potential break-up.

He told 1,000 retail investors gathered at Hong Kong’s Kowloon international trade centre on Tuesday that the board was examining “alternative structures”, without giving details.

But added: “We continue to believe that our current strategy and structure will deliver very good returns over the next few years."

Some retail investors in Hong Kong have come out in support of Ping An’s proposals.