HSBC prepares to resist Chinese investor Ping An’s demands to split into two
HSBC is preparing to resist demands from a Chinese state-backed investor to split into two.
Insiders are said to believe that splitting the bank into separate Asian and Western businesses would be an expensive nightmare.
The London-listed lender, which bills itself as the world’s local bank, was asked by its largest shareholder last week to split its Eastern and Western operations.
Under Pressure: Insiders are said to believe splitting the bank into separate Asian and Western businesses would be a costly nightmare
Pressure from Ping An, a Chinese government-backed insurance giant, would lead to the biggest upheaval in Britain’s banking sector since the global financial crisis.
But the proposal could be politically explosive at a time when geopolitical tensions are at their highest in years.
An attempt by the East to dismantle HSBC – considered the UK’s global banking champion – also goes against the government’s push for a post-Brexit global Briton.
Analysts said a split could ease the political burden on HSBC, which has straddled tensions between Beijing and Washington for some time. John Cronin of investment bank Goodbody said: “I understand the logic from a policy perspective.”
The request raises questions about the 157-year-old HSBC’s UK operations, including its former Midland banking arm.
Chairman Mark Tucker and Chief Executive Noel Quinn have shifted more resources to Asia in recent years. Last year the bank moved three of its top executives from London to Hong Kong in a sign that it was focusing on the East.
HSBC has its roots in Asia. It was founded in 1865 as the Hong Kong and Shanghai Banking Corporation by Scotsman Sir Thomas Sutherland.
The bank made its first foray into Britain when it bought Midland Bank in 1992. Years of global expansion followed, making HSBC the sprawling global entity it is today, with 40 million customers in more than 60 countries.
Analysts believe a split from the group, with a market value of £99billion, could pave the way for a separation of the UK business.
A former HSBC banker pointed to the “closure” of British retail banking as having facilitated the sale.
Britain’s big banks were required to close their high street operations in 2019 to protect them from risky investment banks after the financial crisis.
Shore Capital analyst Gary Greenwood agrees. He said: ‘It’s doable [the UK bank could be spun off] because it is closed.
“If it’s a split, it would probably be through a separate listing. If they go the route of an initial public offering, as a shareholder you could get a share of HSBC in Asia and a HSBC shares in the UK.
However, unraveling HSBC could take years due to its complicated structure.
There are also questions about the schedule. Supporters of the bank say Ping An’s request comes as Quinn’s hatched strategy pays off. The shares are up 30% to 513p since he accelerated the “pivot to Asia” strategy in February 2021.
Splitting up HSBC would also remove its role as a bridge between East and West, which could make it harder for UK companies to sell goods to China.
Any drop in revenue and profits could reduce UK tax levies. Some 77% of HSBC’s trading revenue comes from its international network.
An HSBC spokesman said it was “one of the best performing banking stocks in the world over the past year”, adding: “We have outperformed the Hang Seng index over the past year. ‘about 60%’.