HSBC breakup push requires delicate brushoff: It will take serious diplomatic skills to deliver a polite no to unlikely activist Ping An, say peter_tl and JennHughes13
wants the $125 billion bank to spin off its Asian operations. A radical breakup, however, would do little to solve its problems.
Chair Mark Tucker can hardly be surprised that Ping An, whose 8% stake makes it HSBC’s largest shareholder, is pushing for change. The bank earned a humdrum 6.8% return on tangible equity in the first quarter, short of the 10% it has promised for next year. It also hasn't reached that level, to cover its cost of capital, since 2013. HSBC’s stock price has barely returned to pre-pandemic levels.
Meanwhile, cleaving HSBC may not alleviate its geopolitical headaches. The bank is caught in the crossfire between Beijing, Washington and London. A purely Hong Kong-based Asian lender would not escape such tensions and might even become a bigger target. The U.S. dollar’s central role in international finance means American sanctions remain a potent threat, even for China-based institutions.
In a typical activist siege, HSBC could go on the offensive. Ping An, which has not publicly explained its thinking, requires more careful handling. The two companies have a long history, and it’s unclear whether Chinese authorities share the insurer’s concerns. It will take serious diplomatic skills to deliver a polite no.
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