HSBC 'Committed to China' Despite Ping An Stake Sale

HSBC Canary Wharf

HSBC has insisted it remains committed to China, even as it continued its retrenchment from insurance by selling off its 15.6% stake in Chinese insurer Ping An for $9.4bn (£5.8bn).

The disposal, for a profit of $2.6bn, takes the number of sell-offs or closures by the new chief executive Stuart Gulliver to 42. Gulliver took the helm last year promising to make savings of up to $3.5bn (£2bn) within three years to bolster returns to shareholders.

The sale of the stake, to a group of companies controlled by Thai business Charoen Pokphand, does not affect the bank's longer-term investment in the Bank of Communications (BoCom), in which it has a maximum permitted stake of 19.9%.

Ian Gordon, banks analyst at Investec, said: "In contrast to HSBC's 19% holding in BoCom, we have always regarded its stake in Ping An as a non-strategic play on China – one which has turned out rather well." He said the gain of $2.6bn on the stakewould take HSBC's crucial core tier one capital ratio – a measure of financial strength monitored by regulators – to "an eye-popping 12.2%".

Gordon calculated that the bank's financial disclosures from December 2011 show that the bank was valuing the Ping An stake at $6.4bn, indicating a post-tax gain on the disposal of $2.6bn.

Gulliver said the transaction "represents further progress in the execution of the group's strategy".

He added: "China remains a key market for the group and we will strengthen our focus on growing our own operations and building on our long-term strategic banking partnership with the Bank of Communications."

HSBC bought a 10.1% stake in Ping An for $600m in 2002. In 2005, it paid another $1.1bn to raise its stake to 19.9% but this fell to 15.6% when the bank did not participate in a cash call by Ping An on existing investors in 2010.

Sandy Chen of Cenkos Securities said that the gain from the sale could "offset those pesky US anti-money laundering and prospective Libor fines and charges – an offset that its UK domestic peers lack".

HSBC has warned it could face a fine of at least £940m from US authorities for money laundering offences outlined in a US Senate report, which showed how billions of dollars were laundered for drug barons and terrorists.

Gulliver, who used to run HSBC's investment bank before a boardroom reshuffle in January last year, is trying to step back from doing "everything, everywhere". He warned that about 30,000 jobs would be cut, around half of which have already gone. His promotion came after chairman Stephen Green left the bank to take a seat in the House of Lords as a government minister.

According to Dealogic, the HSBC deal is the sixth largest cross-border mergers and acquisition transaction this year.

Powered by Guardian.co.ukThis article was written by Jill Treanor, for guardian.co.uk on Wednesday 5th December 2012 14.54 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

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