Major investor’s plan to break up HSBC thwarted

HSBC, one of the largest banks in the world, has managed to fend off an attempt by its largest shareholder, Chinese insurer Ping An, to split up the bank. Ping An has been calling for HSBC to separate its Asian business, arguing that its profitable operations in Asia are subsidising other parts of the bank that are not performing as well. However, the proposal failed to gain the support of any other major shareholder during HSBC’s annual general meeting. Chairman Mark Tucker has said that the result “draws a line” under a long-running debate about the bank’s structure.

While HSBC is headquartered in London, the majority of its profits are made in Asia. The bank was founded in Hong Kong and Shanghai in 1865 and, for most of its history, has had a long-distance relationship with the UK. HSBC only became a major UK high-street player in the 1990’s when it bought Midland Bank and moved its headquarters to London in 1993. However, Tucker has argued that a breakup would undermine the bank’s global strategy, and would be both risky and costly.

Beyond making a return on its investment, Ping An is partly owned by the Chinese state and could be representing Beijing’s political aims as much as its shareholders’ financial interests. According to some analysts, HSBC is the centerpiece institution in Hong Kong, China’s most important financial hub, and the idea of leaving the city’s most valuable asset in Western hands could be too risky for Beijing.

The bank’s current predicament highlights an existential crisis that dates back to its founding in Hong Kong under British rule. For HSBC, there is a jarring gap between its center of gravity in Hong Kong and its subservience to regulators in Britain. A more assertive China is now unafraid to project itself in the international business arena, but it has to tread carefully with HSBC – the stakes are high. While Ping An has vowed to continue fighting for the breakup plan, it is unclear what their next step will be.