Summary

HSBC speeding up disposal of non-core markets, assets Bank to renew commitment to deploy more capital to Asia Lender due to report results and strategy on Aug. 1

HSBC Holdings Plc (HSBA.L) is ready to accelerate its exit from non-core markets and allocate more capital in Asia, in an effort to hold off a breakup proposal submitted by its largest shareholder, two people familiar with the matter said.

Ping An Insurance Group Co of China Ltd (601318.SS) requested the bank in April to pursue strategic options such as branching out its mainstay Asian operations to unlock greater shareholder value.

In response, HSBC appointed advisers including London-based investment bank Robey Warshaw to help with an evaluation of its strategy but has not directly mentioned Ping An’s demands. The outlines of its plan to oppose, revealed here for the first time, are the result of that evaluation, according to the sources.

An HSBC spokesperson refused to comment. Ping An, which is China’s largest insurance company, did not instantly respond to requests for comment after normal business hours in Asia.

During its earnings report on August 1, HSBC is predicted to state that the bank’s future rests on its global network of clients and services, the sources said.

But it intends to indicate how it will redouble efforts to achieve previously reported goals to exit non-core businesses and take more of its business to Asia, the sources said. That, practically, could mean abandoning more unlucrative clients in countries such as Germany and France, a third source said.

It may not refer to Ping An by name or hint directly at calls for a breakup, one of the sources said, but by resuming a commitment to redistribute capital to Asia, the lender will tacitly admit it has drifted from those plans.

Further, as a sign of HSBC’s commitment to Asia, the two sources said, Noel Quinn, HSBC Chief Executive a couple of days ago visited Hong Kong and has gone through the mandatory seven-day hotel quarantine to set up the board meeting at its Asian headquarters.

SPEEDING UP

Ping An’s request for a breakup of HSBC came against the backdrop of rising geopolitical tensions between China and the West, which caused some analysts to think that there were more than just financial forces at work behind the proposal.

Mentioning people inside HSBC and Chinese state enterprises, Reuters reported in 2021 that Beijing had become disappointed by the bank over sensitive political and legal issues, from the U.S. indictment of an executive at Chinese tech champion Huawei Technologies to China’s crackdown in Hong Kong.

But the bank’s shares have also tumbled and it stopped dividends completely in 2021 at the request of British regulators who advised banks to preserve capital, which was both a source of resentment to Ping An and the bank’s Hong-Kong-based individual shareholders.

Since then, it has resumed payouts but the consensus forecast of a 2022 payout of 28 cents per ordinary share did not reach its historical payouts. Shares in HSBC have climbed 2.5% since news of Ping An’s demands first came to light on April 29.

In February last year, the bank revealed efforts to have Asia make up 50% of the bank’s capital allocation in the medium to long term from 42% at the time. The bank also said it will readjust its efforts in countries where it can expand, resuming a strategy of exiting non-core markets in recent years.

The bank is attempting to leave Armenia, Turkey, Oman, and Greece, Reuters reported in January 2021, but progress has been mixed. While the lender declared the sale of its Greece business this year, and in Oman it is discussions to amalgamate with local rival Sohar International Bank, a slight progress has been posted on the other sales.

The bank expects fast-forwarding its plans will help soothe Ping An, according to the sources.

HSBC could accelerate exits from those countries, one of the sources said.