Ping An approves HSBC restructuring proposal; although not an activist investor

China’s Ping An Insurance Group stated that it supported calls for HSBC (HSBA.L) to be restructured, which may involve a spinoff of its Asia division, and that it was not an activist investor but worried about investment yields from its sizeable holding in the bank.

When questioned about the motivations behind the insurer, which sources have claimed is encouraging HSBC to explore a spinoff, Ping An’s co-chief executive Jessica Tan acknowledged on Wednesday that it is a sizable investment and they have been investing in it for seven years.

According to Refinitiv statistics, Ping An (601318.SS) is the largest stakeholder of HSBC Holdings Plc, with an 8.3% stake valued at over $10.3 billion.

Tan commented that there is a focus on long-term gains. They are not, however, activist investors.

Prior to Wednesday, Ping An’s top executives had not made any public remarks regarding the HSBC spinoff call. The comments demonstrate that despite previous opposition to a break-up plan from the lender, the Chinese corporation does not intend to change its position.

Tan’s comments were met with no quick comment from HSBC.

In order to enhance shareholder returns, the London-based bank, which generates the majority of its revenues and profits in Asia, was pressured by Ping An in April to look into options such as selling its Asia unit.

Earlier this month, during an investor meeting in Hong Kong attended by hundreds of HSBC’s retail shareholders, the bank’s chairman & CEO were probed for more than a full hour on its approach to dividends and growth.

The conflict with Ping An brings attention to the difficulties the British bank is having as it tries to manage violent conflicts between the US, Britain, and China while also facing criticism from Western lawmakers over the bank’s operations in Hong Kong.

Ping An’s Chief Finance Officer, Deng Bin, said the insurance maintains an open and welcoming attitude toward any measures, proposals, and opinions to enhance the effectiveness and efficiency of HSBC when talking to reporters at its data briefing on Wednesday.

They anticipate it will continue to perform better as a system of long-term cooperation. According to Deng, HSBC is in charge of the future and they assist it in all of its endeavours.

Co-CEO Tan stated that Ping An would accept any investor suggestions that would increase the long-term value of HSBC.

No institutional shareholders have openly supported Ping An’s demand to split up HSBC as of yet.

Ping An’s proposal isn’t being taken seriously by the market since there isn’t a clear justification for it and it’s difficult to convince other shareholders to support it, according to a financial analyst in Hong Kong.

Ping An’s shares, which are traded in Hong Kong, ended the day on Wednesday with a 2.6% gain after its first-half profit above forecasts. Shares of HSBC fell 1%.

HSBC claimed that a breakup would pose immediate risks when carrying out any spinoff or merger and might have a long-term negative impact on the bank’s credit score, tax bill, and operating costs.

Another source revealed that Ping An believed that HSBC had exaggerated the dangers associated with a potential spinoff and that doing so would result in an increase of $25 to $35 billion in market worth. The recent poor performance of the bank hurt the Chinese insurer’s stakes in HSBC. The suspension of dividend payments two years ago had a negative impact on Ping An’s investment income, as seen by the 42% decline in HSBC’s Hong Kong shares from their five-year record in 2018.