4th Nov 2022 18:47
(Alliance News) - HSBC Holdings PLC may be forced to go on the defensive once again, after comments from major shareholder Ping An Insurance were once again in focus on Friday.
Ping An said it would back an HSBC spin-off which is "conducive to improving" the lender's fortunes. It also said it is "urgent" that HSBC cuts costs.
HSBC shares closed 1.6% higher at 470.48 pence each in London on Friday. The stock is up 7.6% over the past 12 months.
"HSBC's London-listed shares have been remarkably firm this year, but it is coming under increased pressure from major shareholder Ping An which has reportedly called on the bank to be more aggressive with cost cuts. In a classic activist investor move, Ping An wants HSBC to demerge its Asian operations," AJ Bell analyst Russ Mould commented.
Ping An holds some 9% of HSBC shares. Ping An said that despite its disagreements with HSBC's executives, the duo have "maintained open, friendly and constructive" dialogue.
HSBC pushed back against calls for a break-up from Ping An.
However, Ping An on Friday said it has never publicly called for a spin-off.
"We would like to take this opportunity to clarify that Ping An has never made any public comments on HSBC's performance, spin-off or other topics. We have repeatedly reiterated that, as one of HSBC's major shareholders, we are willing to study and support any proposals that are conducive to improving HSBC's operating performance and enhancing the company's value, and that are helpful to HSBC's development strategies and business strategies," Ping An.
"However, in recent years, as you have observed, the market has been rather disappointed with HSBC's poor performance, dividends, market capitalization, etc," Ping An said.
Ping An said it would back "any initiatives including a spin-off that are conducive to improve HSBC's performance and value".
"We will consider any suggestions that will help HSBC improve its development and operation strategy. Meanwhile, we would also suggest HSBC adopt an open attitude by studying the relevant suggestions carefully and prudently and incorporating constructive views into its prioritized agenda, rather than attempting to simply bypass and reject them," the insurer added.
The bank has previously hinted it wants to keep its current structure while continuing a pivot to Asia. Global tensions between China and the West have put HSBC in a quandary.
HSBC said in October that it is considering offloading its Canadian business. The lender HSBC noted that it "regularly reviews its businesses in all its markets" but, in particular, is keeping a close eye on its Canada unit.
The bank has recently moved away from its retail operations in the US and France towards further Asian focus.
Ping An on Friday said that while HSBC's cost-cutting plans are bearing fruit, the company's cost-to-income ratio is still far too high at 64.2%, above peer average.
Ping An added: "Meanwhile, HSBC Asia's cost-income ratio is 58.7%, which is 18% points higher than the 40% mean of an equivalent Asia banking peer group. We suggest HSBC be much more aggressive in radically reducing its costs to close the huge 'cost-income ratio gap', for example, by reducing its operating costs such as manpower and IT, as well as reducing its 'global headquarters costs as a % revenue' compared to that of an equivalent peer group. This is the most important, urgent and absolutely needed action for HSBC to improve its business performance, reducing costs and increasing efficiency, particularly amid slowing growth in the global financial industry."
By Eric Cunha; [email protected]
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