HSBC shares rise as markets brace for proposed breakout from major shareholder

SINGAPORE/HONG KONG, May 3 (Reuters) – Shares of HSBC Holdings gained on Tuesday after its largest shareholder, Chinese insurance giant Ping An (601318.SS) called for the breakup of the Singapore-based bank. London with the aim of improving Back.

Sources familiar with the situation said on Friday that Ping An had asked HSBC to consider options, including splitting off the Asian business, where it makes two-thirds of its pre-tax profits, or to take other measures. to increase its value. L2N2WR21M

HSBC shares added 1.85% to Hong Kong trade, helping lift the broader market (.HSI), which edged up 0.1% to cushion earlier market declines. Stock exchanges in Hong Kong and London were closed on Monday for a public holiday.

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“The fact that Asia accounts for the majority of HSBC’s revenue suggests that a fallout may be logical, but it must be balanced against the fact that a significant part of it is the result of HSBC’s global footprint. connecting East and West,” Justin said. Tang, head of Asian research at investment advisory firm United First Partners.

HSBC, Europe’s largest bank, did not comment on Ping An’s involvement but defended its overall strategy in a statement, saying it believed it had the right strategy and was focused on executing it. L2N2WR21M

Chief executive Noel Quinn, who has led the bank for two years, is investing billions in Asia to drive growth, with a focus on wealth management, and has also transferred global leaders there.

Ping An, China’s largest insurer, said on Saturday it backs any reform proposals from investors that could help HSBC’s long-term value growth.

Ping An held an 8.23% stake in the banking giant as of Feb. 11, according to Refinitiv data. He first announced a 5% stake in HSBC in late 2017 and HSBC shares have fallen 35% since then.

“We don’t believe constructive shareholder engagement can be bad for share price,” UBS analysts said in a report Friday.

However, they noted that potentially large restructuring costs, lower network revenues, higher post-separation costs due to reduced scale advantages and, above all, low valuations for UK national banks would dent any break-up.

Shares of Hong Kong-listed HSBC have jumped around 80% since hitting a 25-year low in September 2020.

HSBC last month suspended plans to buy back shares this year after reporting an unexpected hit to its capital as a cocktail of rising inflation, geopolitical drama and economic weakness hampered its outlook. L2N2WO06P

The bank employs 220,000 people and serves approximately 40 million customers worldwide through a network that covers 64 countries and territories.

In February 2020, the bank lowered its long-term profitability target and unveiled a revised strategy focused primarily on wealth management in Asia after the shock of the COVID-19 pandemic saw its annual profit fall sharply.

HSBC dropped its target of achieving a return on tangible equity of 10% to 12%, and said it would instead aim for 10% over the medium term.

Some analysts have also called on the bank to split its global operations, arguing that its global network adds costs without delivering enough benefits.

British media first described the plan last week, without identifying the shareholder.

HSBC has navigated escalating political tensions between China, Britain, Europe and the United States.

In 2016, the bank decided to keep its headquarters in London, rejecting the option of moving its center of gravity to Hong Kong after a 10-month review.

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Reporting by Anshuman Daga; Additional reporting by Donny Kwok in Hong Kong; Editing by Richard Pullin

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