HSBC’s largest shareholder wants the bank to spin off its Asia operations, in a move that could unlock $26.5 billion of market value
HSBC is fighting off an effort from one of its largest shareholders, Ping An Insurance, to split the financial giant’s business into Western and Asian halves, as the British bank’s spread across two hemispheres has grown precarious amid increased tensions between China and the West.
According to a new report from In Toto Consultancy, spinning off the bank’s Asia business could provide a windfall for investors, too—unlocking $26.5 billion of capital for current shareholders, or about one-fifth of the bank’s total current market value.
“It is sensible to engage in a deeper conversation about whether a more radical restructuring is necessary for HSBC to not only survive but thrive over the longer run,” Asheefa Sarangi, managing director and founder of In Toto Consultancy, told Bloomberg Sunday.
According to the Sunday Times, In Toto’s research was commissioned by Ping An—the Chinese insurance giant that is campaigning for HSBC to split.
Ping An, which owns 9.2% of HSBC shares, began its push to separate the bank into East and West entities in May, as the Chinese insurer reportedly grew frustrated by the bank’s falling share price. HSBC’s New York–listed shares have dropped 22% since their February peak. Ping An might also have been rankled by the fact that U.K. banking regulators forced HSBC to stop paying dividends for a year starting April 2020, cutting a source of income for shareholders.
According to the Financial Times, Ping An believes breaking up the bank would create an independent Asia business that is more nimble, more autonomous, more profitable, and less susceptible to political intrigue than the current global behemoth is.
HSBC’s position straddling the Western and Chinese markets has left the bank subject to political pressure from governments on both sides, leaving it sometimes caught between the two. In 2020, U.S. and U.K. politicians criticized the bank for cooperating with Hong Kong authorities in freezing the accounts of political activists and opposition politicians in the Asian financial hub.
The same year, Chinese state media also attacked HSBC for its alleged role in facilitating the arrest in Vancouver of Huawei CFO Meng Wanzhou, who was accused by the U.S. of trying to evade sanctions on Iran.
HSBC is resisting calls to spin off its Asia business, hiring Goldman Sachs and investment bank Robey Warshaw to help prepare a defense against Ping An. HSBC executives hope to argue that splitting the bank up would take years to complete, distracting it from turnaround efforts already underway, reported the Financial Times.
The bank has sold off underperforming businesses in markets like the U.S. and France as it undergoes its pivot to Asia. Other analysts agree that splitting up the bank could destroy value rather than create it. Barclays estimates that spinning off HSBC’s Asia business would shave as much as 8% off the bank’s market value.
Neither HSBC nor Ping An immediately responded to a request for comment.