HSBC’s largest shareholder has called for the bank to create a separate listed Asian business headquartered at Hong Kong in order to correct what it perceives as a lack competitiveness.
In a statement released on Tuesday, Ping An Asset Management CEO, Ping An Asset Management, said that despite the improvements made, HSBC's performance was still 'deeply concerning'.
Michael Huang wrote: 'It's necessary for HSBC, to push for structural changes to fundamentally address HSBC’s underlying competitiveness issues in the market, improve performance, increase value, and accelerate growth opportunities throughout Asia'.
'The HK listed business will be able focus on investing in Asia, and be more attuned with local Asia market dynamics' he said. Ping An Asset Management owns just over 8% HSBC shares.
Europe's largest bank faces increasing calls to spin-off its Asia business. The latest request comes weeks before the annual meeting of shareholders is due to vote. This could force HSBC to create a plan for splitting off or reorganizing its Asian business, which is HSBC’s main source profit.
Noel Quinn, CEO of HSBC (HBCYF), said that a bank breakup would lead to'significant revenue losses' as much of its business was dependent on cross-border transaction. He defended HSBC's (HBCYF's) strategy with chairman Mark Tucker and stated that splitting the bank was not in shareholders' interest.
HSBC reaffirmed this position on Tuesday.
It is our opinion, supported by independent financial and legal advice and third-party assurances, that alternative structure options will not increase value for shareholders. A spokesperson for the Bank said that they would instead have a negative material impact on value.
"We are clear that the current strategy is a safe, fast and value-enhancing method to generate returns."
Huang wrote that the management of the lender had "exaggerated" many of the risks and costs of a split. Despite having made multiple suggestions to HSBC's management, Huang said that the bank's attitude towards all possible solutions was a constant one of closed-mindedness.
'We are convinced that the HSBC team, as well as its external paid advisers, have a preconceived opinion against any review of structural options. This is despite our repeated requests for an open dialog and the demands made by other shareholders.
According to Huang, under Ping An’s proposal, HSBC Group will remain the controlling shareholder in a separate listed bank with headquarters in Asia. This would give it 'great power' over 'commercial agreements'.
He argued the spinoff will improve HSBC’s financial returns. He said they are currently behind those of competitors. Huang pointed out that HSBC had a return of equity -- a measure for a bank's profit -- of 9.9% compared to the 12.5% average among its peers in 2022.
HSBC Asia - a bank that will be unique and valuable in Asia, with the highest growth potential, within the HSBC System, as well as the only local bank to have global competitiveness - is the bank that he said would "be the most valuable bank and the one with the greatest growth potential."