HSBC’s choice of Asian strategy in the spotlight
HSBC’s earnings and other figures encouraged investors earlier this week, but there is chatter over calls from Ping An, China’s big insurer, to halt its Asia operations to improve results . The bank met with shareholders yesterday.
HSBC bosses were due to meet shareholders in Hong Kong yesterday to discuss moves such as a promise to pay bigger dividends and discuss pressure for it to be broken up by big shareholder Ping An Insurance Group of China, aka Ping Year.
As reported here, HSBC released financial results on Monday, including an increase in profits for the six months to the end of June. The figures also show that the Asia region now accounts for almost 70% of the group’s profits. HSBC has deep historical roots in Asia, and much of its strategy has been to tap into the region’s growing wealth.
However, the bank’s Asian profile is also a puzzle. The banking group would have rejected a proposal from the Ping An insurance group (source: Reuters, August 1) to dismantle the bank listed in the United Kingdom and Hong Kong. HSBC is likely to object, given how it regularly references the benefits of its global status, such as its variety of revenue streams.
Ping An has been building a stake in the lender since 2017. The group offered to spin off HSBC’s Asian operations in April this year.
On a call with analysts, Chief Executive Officer Noel Quinn reportedly told analysts, “We have sympathy for Ping An and all of our shareholders as our performance has not been where it should be over the past few years. last 10 years.”
HSBC shares fell around 2% yesterday; on Monday, after the earnings announcement, they had closed more than 8% as investors were encouraged by the promise of a return to quarterly dividends.
The sheer importance of Asia to HSBC is likely to be uncomfortable for a UK-based bank where relations between the West and China have cooled following Beijing’s security crackdown in Hong Kong. Kong, for example. In July, there was controversy when it was revealed that employees who form branches of the Chinese Communist Party within private companies had a unit in HSBC’s securities business in China. HSBC was quoted by the media as saying that these branches were a common feature and had no influence on the day-to-day operations of the bank.
Ping An argues that HSBC cannot easily reconcile its large Chinese exposures while remaining on the good side of UK regulators and policymakers. The insurer says this dilemma has affected HSBC’s share price and that an independent Asian company listed in Hong Kong would be more profitable, require less capital and have more freedom to make decisions. On the other hand, he could not boast of the global structure that has made its mark so much in recent years. In contrast, a number of rival banks have closed reservation centers and focused on specific regions. For example, Citigroup is selling a number of retail businesses around the world and moving into wealth management. (For example, he sold his business in the Philippines this week.)
In 2008, when the financial crisis hit, the sheer size of some banks raised questions about whether these lenders had become “too big to fail” and the UK government would lack the resources to bail them out. HSBC, with its global power, did not need a bailout; at the time, its CEO was critical of state support for other lenders.