Ping An has come out publicly for the first time to support a spin-off at HSBC, placing emphasis on the British lender’s relatively high cost base.
After calling for a breakup in February, Ping An has come out in public for the first time to detail its worries, calling on the British lender to be «much more aggressive» in cutting costs to improve profitability.
«We will support any initiatives, including a spin-off that, are conducive to improve HSBC’s performance and value,» said Ping An Asset Management chairman Michael Huang in a «Financial Times» report.
High Cost Base
According to Huang, HSBC’s cost-income ratio of 64.2 percent was 13 percentage points higher than the market average and he urged for cuts in areas such as manpower, IT and headquarters-related expenses.
He also noted that the 8.3 percent return on tangible equity was «far below» the 12.3 percent average amongst peers.
«This is the most important, urgent and absolutely needed action for HSBC to improve its business performance, reducing costs and increasing efficiency, particularly amid slowing growth in the global financial industry,» Huang added.
Personnel Concerns
In addition, Huang also highlighted concerns about personnel, specifically with regard to the lack of Asia experience among senior managers.
«To our understanding, three out of HSBC’s four global business line CEOs only have one year’s work experience or less in Asia,» he said. «[HSBC should] strengthen its market position in Asia and capture the opportunities arising from the rapid development in the Asian market, while striking a balance between its global finance model and cross-border systemic and geopolitical risks.»
According to HSBC's existing plans, it aims to reduce costs by $5.5 billion by the end of this year with another $1 billion cut in 2023. The bank is on track to meet all its financial targets from next year onwards, according to a statement, including a 12 percent return on tangible equity.
