Chinese insurer Ping An, main shareholder of HSBC, becomes a quiet activist


HONG KONG—Ping An Insurance in China 601318 2.06%

quietly took on the role of activist shareholder, lobbying HSBC HSBC 0.03%

to consider an overhaul that could reshape one of the world’s largest financial institutions.

The Chinese financial giant first disclosed a stake in HSBC in 2017 and is now the UK lender’s largest shareholder, with a stake of more than 8%. Ping An wants HSBC to undertake an overhaul that would allow the market to give the bank more credit for its big Asian business and make those operations less beholden to London regulators.

The success could potentially lead HSBC Holdings PLC to sell shares of its Asian arm to create a separate listing for the Hong Kong-centric business, which generated nearly 65% ​​of HSBC’s $18.9 billion pre-tax profit. Last year. A more radical solution would be to break the bank in two, by selling HSBC in Asia to shareholders.

HSBC ended last year with $3 trillion in assets. It is Europe’s largest bank by market value, according to data from S&P Global Market Intelligence, with a value of around $125 billion as of Friday’s close. Shares of the Hong Kong-listed bank have fallen by more than a third since December 2017, when the insurer, officially known as Ping An Insurance (Group) Co. of China, first announced a significant holding after his holding exceeds 5%.

For Ping An, China’s most valuable publicly traded insurer with a market capitalization equivalent to around $122 billion, this is an unprecedented move towards global shareholder activism. He proceeds with some caution, having previously characterized his stake in HSBC as a straightforward financial investment to help generate returns for his insurance business.

The Chinese conglomerate first pleaded its case anonymously with the help of an outside public relations firm, people familiar with the matter said, ahead of HSBC’s first-quarter results and meeting Annual Meeting of Shareholders, both of which took place last week. On Friday, Bloomberg and the Financial Times identified Ping An as the investor seeking change.

Even now, Ping An remains guarded. A spokesman said he wanted shareholders to participate in a debate about the bank’s future. “We will support any suggestions aimed at improving the value of HSBC and improving its business management,” the spokesperson said.

Although he has a large enough stake to call a shareholders meeting for a vote on an HSBC overhaul, Ping An will not do so himself, but would back other investors if they take the lead, the official said. one of the people familiar with the matter. Monday.

A company spokesperson said: “HSBC has a regular program of engagement with all of our investors”, and pointed to the bank’s recent share price performance as evidence of its success. Shares of Hong Kong-listed HSBC have been roughly flat over the past 12 months, while the city’s Hang Seng index has fallen 28%, according to Refinitiv data.

The pressure from its largest shareholder is the latest in a series of leadership challenges at HSBC, which has sharpened the bank’s focus on Asia under chief executive Noel Quinn, while scaling back its activities in markets such as the United States and France.

“Our international network is our greatest strength,” Mr. Quinn said in a statement prepared for last Friday’s annual general meeting. In HSBC’s global banking and market business, about half of the revenue from customers registered in Asia comes from customers based elsewhere, he said.

Like many lenders, HSBC’s business has until recently been hampered by ultra-low global interest rates, which are eating away at banks’ profits on loans. Last week, HSBC said its quarterly profit fell 28% as it made provisions for loans in Russia and China, but a rate hike would help it meet its longer-term targets.

Shares of HSBC listed in Hong Kong have been roughly flat over the past 12 months.


Photo:

andy rain/Shutterstock

HSBC has been based in London since 1993. In 2015 and 2016 it conducted a 10-month review which considered whether the lender should move to Hong Kong or elsewhere, and its board decided to keep the headquarters unchanged. In recent years, HSBC has been caught up in heightened geopolitical tensions between China and the West, especially as Beijing has tightened its grip on Hong Kong.

About two years ago, when the coronavirus was sweeping Europe, the Bank of England told HSBC and other UK banks to stop paying dividends, so they could conserve capital during the pandemic. The central bank made the request in March 2020 and lifted it in December of the same year. HSBC resumed paying a dividend in April 2021. The suspension had been particularly unpopular in Hong Kong, where many investors held HSBC shares in part for its large payouts.

A model campaign at HSBC could be insurer Prudential PLC, another UK-based financial firm that focuses on Asia.

In 2020, hedge fund firm Third Point LLC tapped Prudential to separate its US and Asian operations. Prudential eventually created its US branch, Jackson Financial Inc.,

to shareholders in 2021, after also exploring an initial public offering from that company.

Under the leadership of Founder and Chairman Peter Ma, Ping An has grown into one of China’s largest and most influential financial groups, with diverse interests in areas such as banking, healthcare and fintech as well as than insurance. HSBC was once Ping An’s largest shareholder, before the bank sold its 15.6% stake in the insurer a decade ago.

Ping An built his stake in HSBC over several years through its asset management subsidiary. Its stake was worth about $10.2 billion as of Friday’s close in Hong Kong. The stake was 8.2% of the bank’s shares, according to FactSet.

Write to Quentin Webb at [email protected] and Rebecca Feng at [email protected]

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