Globalization was the cornerstone of HSBC Holdings’ East-meets-West business strategy. Now, competing interests are driving a campaign to demolish it. Ping An Insurance Group, the company’s largest shareholder, proposed the idea of separating HSBC’s Asian and Western divisions, but it has received support from Hong Kong-based private shareholders.
On August 2, HSBC Group CEO Noel Quinn attempted to clarify the bank’s position to shareholders, while supporters of an urgent breakup yelled demands for management to resign from the outside. They effectively communicated their point with a large banner. According to Nikkie Asia, Quinn could hear Ping An’s plan being criticised and supported from within.
HSBC’s management opposes the proposal and questions whether the bank’s current organisational structure is justified, especially given geopolitical tensions between China and the West. Ping An, one of China’s largest financial conglomerates, owns more than 8% of HSBC. Its stockholders include state-owned enterprises and it operates in a variety of financial sectors, from banking to insurance to fintech.
In August, HSBC outlined 14 reasons for its opposition to the plan, including the fact that redesigning its IT infrastructure would take three to five years and that regulatory approval from governments around the world would be required. HSBC also rejected the proposal to invite a Ping An board member.
‘International connectivity is at the heart of our entire value proposition, from clients to employees, and it has contributed to our improved returns,’ Quinn said. ‘We have concluded that alternative structural options will not result in increased shareholder value,’ he said. ‘ Rather, they would have a materially negative impact on value,’ says the author.
‘HSBC only emphasised and clearly exaggerated the downsides and challenges of spinning off its Asia business, but did not mention the huge benefits and long-term value that a spinoff could create,’ a source close to Ping An said.
The plan to separate HSBC has a rich history. When Hong Kong was still ruled by the British, the bank was founded in 1865. It is the Hong Kong dollar’s issuer. Despite the company’s relocation to London in 1993, the Asian market remains its primary source of revenue. In 2021, HSBC announced plans to invest $6 billion in its Asian operations over the next five years. It also intended to relocate some executives from London to Hong Kong and to sell its French retail operation.