HSBC Nixes Ping An Break-up Call; Offers Stockholders Higher Dividends
HSBC pushed back on a proposal by top shareholder Ping An Insurance Group Co. of China to split the lender, a move Europe's biggest bank said would be costly, while posting profits that beat expectations and promising chunkier dividends, Lawrence White and Anshuman Daga reported for Reuters.
Photo Insert: HSBC's comments on Monday represent its most direct defense yet since news of Ping An's proposal for carving out the lender's Asian operations broke in April.
London-headquartered HSBC's comments on Monday represent its most direct defense yet since news of Ping An's proposal for carving out the lender's Asian operations broke in April. It comes ahead of HSBC's meeting with shareholders in Hong Kong on Tuesday where the Chinese insurer's proposal will be discussed.
And in moves that pleased investors, HSBC raised its target for return on tangible equity, a key performance metric, to at least 12% from next year versus a 10% minimum flagged earlier.
As key reasons for its increased optimism, the bank cited falling costs, a 4% rise in adjusted revenues, and a growing net interest margin as central bank rate hikes improve lending returns.
It also vowed to revert to paying quarterly dividends from early 2023. HSBC's shares rose almost 8% in London to trade at their highest since end-June.
"We have sympathy for Ping An and all our shareholders that our performance has not been where it needed to be for the last 10 years," Chief Executive Noel Quinn, who has run the bank for more than two years, told analysts. Asia is HSBC's biggest profit centre, with the region's share of the lender's profit rising to 69% in the first half from 64% a year ago.
Without directly referring to Ping An by name in its earnings presentation earlier on Monday, HSBC said a break-up would mean a potential long-term hit to the bank's credit rating, tax bill, and operating costs, and bring immediate risks in executing any spinoff or merger.
"There would be a significant execution risk over a three to five year period when clients, employees, and shareholders would all be distracted," Quinn said on the call, regarding the break-up proposal.