Ping An continues war of words with HSBC over proposed Asian arm listing

China’s biggest insurer said its proposal to list HSBC’s Asian operations in Hong Kong would not result in value destruction, higher costs
Ping An has been pushing for HSBC to make structural changes to increase shareholder value

Banking & finance

Chad Brayin London

Published: 10:25pm, 21 Apr 2023

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Ping An Insurance Group hit back at HSBC again on Friday in the latest tit-for-tat between the companies over its push to separately list the bank’s Asian operations in Hong Kong.

The asset management arm of China’s biggest insurer called for HSBC earlier this week to sell a minority stake in the bank’s Asian arm through a listing on the Hong Kong stock exchange, with HSBC remaining the unit’s majority owner similar to the lender’s 62.14 per cent ownership of Hang Seng Bank.

On Friday, Michael Huang, Ping An Asset Management’s chairman and CEO, denied that its latest proposal was a “spin off” of HSBC’s Asian operations and said it should not result in the “exaggerated global value destruction, surging operating costs and legal barriers as portrayed by HSBC”.

“Up to now, HSBC has not engaged in any deep discussions with Ping An regarding the new strategic restructuring proposal,” he said in a statement. “As in accordance with the fundamental principles of global corporate governance principles, HSBC should at least respect their shareholders and their concerns or views.”

05:25

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

HSBC declined to comment on Friday, referring journalists to its statement earlier this week pushing back against Ping An’s claims on the benefits of its proposal.

The statement marks the latest in an increasingly heated war of words between HSBC and its biggest shareholder over the bank’s strategy ahead its latest annual general meeting on May 5.

At next month’s meeting in Birmingham, England, investors are expected to consider a series of proposals by a group of frustrated minority shareholders to increase the bank’s dividend payments and to radically reshape its business. HSBC has recommended investors reject those resolutions.

The proposals come as a portion of HSBC’s retail shareholder base in Hong Kong remains frustrated over the cancellation of its final dividend for 2019 and suspension of its dividend in 2020 at the request of its chief regulator in Britain.

Investors line up to attend an informal meeting of HSBC shareholders in Hong Kong on April 3. Photo: Xiaomei Chen

HSBC announced it biggest annual dividend payment in four years in February and committed to dividend payout ratio of 50 per cent for 2023 and 2024, excluding “material significant items”. The bank also said it would consider future share buy-backs.

Meanwhile, Ping An has engaged in an unorthodox campaign over the past year to push HSBC to make changes to increase shareholder value, including a potential spin-off of the Asian business. It also claimed that HSBC has taken a “closed-minded approach” to recommendations to shake up the business.

The London-based lender generates the bulk of its pre-tax profit in Asia and is the biggest of Hong Kong’s three currency-issuing banks.

On Wednesday, HSBC said Ping An’s recommendation to separately list the Asian arm would result in a “material loss of value” and “significantly dilute” the international business model that underlies the bank’s strategy.

HSBC CEO Noel Quinn attends a closed-door meeting at the office of Hong Kong Monetary Authority in Central in November. Photo: Sam Tsang

“This would result in a material erosion of earnings, returns, dividends and shareholder value, and a disruption to our unique global customer service proposition,” HSBC said on Wednesday.

HSBC also hit back at jibes that it has not taken shareholder proposals seriously, saying it had “extensive and senior-level engagement” with Ping An in 2022 and 2023. That included about 20 meetings involving its chairman, CEO and senior managers, the bank said.

The push by Ping An also comes as HSBC CEO Noel Quinn has moved since becoming CEO in 2019 to shift capital from underperforming operations in the West to growth markets in Asia.

That has included exiting its mass-market retail business in the United States in 2021 and agreeing to sell its Canadian operations to Royal Bank of Canada last year.

In recent days, HSBC said a sale of its French retail banking business to a Cerberus Capital Management-backed business was “less certain” because of a sharp rise in interest rates in France in the past year.