HSBC's largest shareholder Ping An invites international debate about the prospects of an Asia break-up as a way of improving long-term growth.
HSBC shares have been on the rise since a spate of international media reports indicating that its largest shareholder, Ping An, had privately approached the British lender suggesting a spin-off of the business in Asia.
But a «Reuters» report citing comments from a number of financial firms indicated that the proposal has not been well received. UBS analysts highlighted limited, if any, upside from the break-up, citing potentially large restructuring costs, lower network income, higher post-separation costs from reduced benefits of scale, and low valuations for U.K. domestic banks. Analysts from Investec and Federated Hermes also highlighted the potential downside, saying HSBC would be less diversified and less connected to international trade.
Prudential History
At U.S. financial firm Jefferies, analysts underlined Prudential’s 2018 break-up as a reference point, noting that it has not generated much value for the parent since it restructured.
HSBC on the Defensive
Although HSBC has not directly responded to the proposals, it has repeated its statement that it believes it has the «right strategy» to generate higher returns and maximize shareholder value in the fastest way.
«We’re the largest trade bank in the world by quite a degree. We’re one of the largest global payment houses in the world. We’re one of the largest foreign exchange banks in the world,» HSBC group CEO Noel Quinn said during the recent annual shareholders meeting.
«One must recognize that much of that trade and payments activity is into and out of Asia. I think we’re uniquely positioned to help, particularly, corporate customers and some of our international retail customers' trade between the West and the East and that is what we’ve been doing for 156 years,» Quinn continued.
