HSBC is missing out on £22bn of shareholder returns by not spinning off its Asian operation as a separate business, according to new research commissioned by the major investor pushing for a breakup of the bank.
Chinese insurance giant Ping An, which has a nine per cent stake in HSBC, has been campaigning for HSBC to divide its Asian business which last year accounted for 45 per cent of its revenue and 65 per cent of profits.
New research commissioned by Ping An to justify its push for a breakup, first reported by the Sunday Times, has explored three options for dividing the banks’ Asian arm: spinning off the Asian business entirely; separately listing 25 per cent of the division; or floating 25 per cent of the Hong Kong retail business only.
The first option would generate $26.5bn (£21.bn) of value, the Sunday Times reported, while the second would deliver $8.2bn, and the third would generate $19.2bn.
Hong Kong-based consultancy In Toto, which conducted the research, flagged the difficulties of carving out the Asian business, however, due to the legacy interwoven structure of the bank and the debt it would need to issue to fulfil regulatory obligations and protect savers.
In Toto said there could be “temporary or technical impacts to the business or market sentiment” not captured in its calculations, as well as listing other “cons” including earnings and market performance volatility, and a potentially protracted timetable for any deal.
The consultancy’s calculations hinge on the bank fetching the higher valuations that streamlined Asian banks receive in Hong Kong, but a lesser valuation would give potential upside for investors of $13.8bn, according to reports.
HSBC has been contacted for comment.
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