HSBC to sell $9bn stake in China’s Ping An

HSBC Holdings Plc

HSBC Holdings Plc

HSBC Holdings Plc has confirmed that it is negotiating the sale of its 15.6 percent stake in China’s Ping An Insurance Co., which is worth approximately $9 billion, as it tries to boost its profitability. On the 19th of November, shares of HSBC grew approximately 1.4 percent in Hong Kong after the biggest Europe’s bank informed about its plans to sell stakes in the China’s second-biggest insurer.

Sale of Ping An

HSBC, the biggest bank of Britain, is said to have spent as much as $1.7 billion to acquire roughly 15.6 percent stake in China’s Ping An Insurance Co. at the beginning of the 21st century. The confirmed talks regarding the sale of HSBC’s stakes in the China’s second-largest insurer have been awaited as the Europe’s biggest bank has to apply its recovery plan as well as implement regulatory reforms. After HSBC confirmed its talks to sell its stake in China’s Ping An Insurance Co., shares of the Chinese company slumped approximately 3.5 percent in Hong Kong trading.

Stuart Gulliver, chief executive officer at HSBC Holdings Plc, underlined that the bank had been forced to take into consideration sales of its assets as it had been struggling with money laundering investigations and compensation claims as well. Therefore HSBC is trying to cut its costs. But the sale of its stake in Ping An Insurance Co. is not the first recent sale transaction of HSBC Holdings Plc. The Europe’s biggest bank has already agreed to sell several units located in Asia and Latin America.

All recent negotiations regarding sales of its assets are nothing else than a part of its three-year restructuring plan which focuses on increasing company’s profitability by selling or shutting down its underperforming businesses. Certainly the ongoing talks have been caused by regulatory requirements that are due to go into effect in 2013. It is worth highlighting that other banks have been recently selling their minority stakes in Asia’s banks, just to mention Citigroup Inc.

However HSBC’s stake in China’s Ping An Insurance Co. is considered one of the most valuable and significant company’s stake in this market. HSBC Holdings Plc also holds as much as 19.9 percent stake in Bank of Communications Co. Ltd. As it was stated by company’s officials, the bank wants to increase its stake in the China’s fifth-largest bank; however according to China’s law, foreign banks are capped at 20 percent stakes in China’s banks.

Wilson Li, an analyst with Guotai Junan Securities Co., noted: “HSBC can reinvest the proceeds from the share sale in its organic business in China. That would actually generate more benefits than the existing investment in Ping An.”

Potential buyers of Ping An

The UK bank has declined to reveal the party with whom it is having negotiations on the sale of its stake in China’s Ping An Insurance Co. Yet according to a source familiar with the matter, Charoen Pokphand Group is one of the companies interested in acquiring HSBC’s stake in China’s Ping An Insurance Co. Charoen Pokphand Group is backed by the richest person in Thailand, Dhanin Chearavanont.

In the statement released on the 19th of November, HSBC Holdings Plc confirmed negotiations; it did not comment on the parties involved in the talks tough. Yet the Europe’s biggest bank underlined that the talks might not lead to the sale of its stake in China’s insurer.

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