HSBC chief executive Noel Quinn has denied that Ping An’s campaign to break up the bank is directed from Beijing and said the Chinese insurer’s demands are not backed by other large shareholders or its customers.
Ping An, the lender’s largest investor with almost a tenth of the stock, has called for HSBC to spin off its Asian business, citing years of poor performance, persistently high costs and a falling share price. It has also argued the bank can no longer effectively operate straddling east and west in an era of tense US-China geopolitics.
Given HSBC’s dominant position in Hong Kong, where it was founded in 1865, there has been persistent speculation that Ping An’s drive to break up the bank is being pushed by the government in Beijing, which is trying to increase its control over the city’s financial system.
However, Quinn denied that suggestion in an interview at the FT’s Global Banking Summit on Thursday morning. “I do not believe it is politically motivated based on all the dialogue we’ve had with various stakeholders. Quite the contrary,” he said.
“We’re viewed in Asia, in Hong Kong, in China as an important international bank. We’re an international bank that has been there for 157 years, helping Hong Kong develop as an economy, helping China develop. Based on the conversations we’ve had, that is a position that is still valued and people want us to take.”
He added that Ping An’s activist campaign, which started in April, had failed to win traction with the bank’s other large international investors and customers. HSBC itself has pushed back against the demands, hiring Goldman Sachs and Robey Warshaw to rebut the economics of the plan, claiming it would be too expensive and put at risk its dollar clearing licence, vital to its core global trade financing operations.
“The conversations I’ve had with other institutional investors are that they also do not believe there is an economic case for splitting the bank,” Quinn said.
“They also believe there will be value destruction of a material level, not value creation. The case for change is not a universally backed case for change and I do not believe it is a politically based case for change,” he added. “Our customers . . . do not think it is the right thing either.”
Pressure from Ping An has had an impact on the bank’s strategy and Quinn conceded that he had given “very serious consideration” to its ideas and agreed with some of the insurer’s criticisms on high costs and poor returns.
HSBC has moved more aggressively to cut costs and sell peripheral units, most recently the $10bn sale of its Canadian operations, following the earlier disposals of lossmaking retail networks in the US and France.
The bank has also identified $1.7bn of extra cuts, which help keep costs down as inflation rises, which can be implemented next year, Quinn said. Its overall target of costs rising 2 per cent in 2023 remained in place, he added.
In the interview, Quinn said that the disastrous mini-Budget that froze the gilts market and caused the pound to plunge had been a “very difficult period of time” that had damaged the UK’s economic credibility. However, the policies of new Prime Minister Rishi Sunak had gone some way to reassuring international markets.
“The confidence has come back into the appropriate balance between fiscal and monetary policy,” Quinn said. “The UK is still very investable, in my opinion.”
Earlier in the week at the same FT conference, Lloyds Bank chief Charlie Nunn said: “There is nervousness at the moment about the UK . . . around the lack of stability that we’ve had.”
Quinn also discussed his future as chief executive of the group, which he has led for three years, following recent changes to its senior leadership. He said he intended to stay in the role for “many more years” and that recent executive moves were part of his plans to make sure there were “three or four” potential internal successors for his board.
In October, HSBC announced it was replacing Ewen Stevenson as chief financial officer at the end of the year. Georges Elhedery, co-head of global banking and markets, is to take over the position, setting him up to potentially succeed Quinn as chief.
Quinn declined to name any of the other three candidates he is grooming.