HSBC bosses ‘in denial’ over China’s resolve to split off Asian arm

Divide: HSBC spans East and West

HSBC bosses are preparing to mount a stalwart defence this week against calls by major shareholder Ping An for the bank’s break-up. 

But a top expert on China has this weekend accused the bank’s bosses of being in ‘public denial’ about Beijing’s determination to split off HSBC’s Asian operations. 

Executives at the lender are understood to believe that a separation would be costly and disrupt its international trade business. They are expected to hold the line on any new break-up push this week when the banking giant issues its second-quarter results. 

It comes after Ping An, the state-backed Chinese insurer that has built an 8 per cent stake over recent years, launched a campaign in April to force the split. Then, last week, it emerged that HSBC had become the first foreign firm operating in the country to formally establish a Chinese Communist Party (CCP) committee within its ranks. 

HSBC’s board and several City figures have claimed the company is stronger as one entity because much of its revenue is generated from connecting businesses in the East and West. 

But Michael Sheri­dan, an expert on the communist state and author of The Gate To China, said a split of the British firm into separate Western and Asian businesses was now almost inevitable. He described HSBC as ‘the diamond bank in Hong Kong’, and claimed that officials in Beijing are desperate to get their hands on it. There is growing concern about Beijing meddling. 

Carmaker Stellantis this month ditched its Jeep operation in the country and boss Carlos Tavares complained political interference is increasing ‘by the day’. 

The Mail on Sunday has been told by City advisers that separating HSBC’s UK business, with its Birmingham headquarters, regulated capital structure and management team, would be relatively straightforward. That would allow the remainder of the group to ‘pivot’ toward Asia, they said. 

One source said the question had been raised of ‘what to do’ with the UK business after the company sold its US retail banking network last year and as the focus shifted to Asia. Another source said that separation of the UK banking arm is not under consideration. 

Sheridan said: ‘There are sound financial and commercial reasons for advocating a break-up. But the reason for [Ping An’s demand] is not financial or commercial – it’s political.

‘The board of Ping An did not wake up one morning seized with a sudden fit of shareholder activism. The top management at HSBC are in public denial. They are trying to reason on a financial, commercial level against an argument that’s not being made on commercial grounds.’ 

The bank is based in Britain, with a substantial presence on UK high streets. But it makes most of its money in Asia, leaving executives walking a tightrope that means co-operating with the CCP. 

That position has become increasingly unpalatable to British politicians following China’s imposition of a draconian ‘national security’ law on Hong Kong in 2020. Sheridan concludes that the growing tensions since mean that HSBC and its boss, Noel Quinn, will eventually have little choice but to split the bank. 

HSBC has denied that the establishment of a CCP committee within its investment bank – required under Chinese law if requested by employees – was driven by anything other than a staff petition. But Sheridan said: ‘This is a high-level, state-controlled move. It’s the result of a top-level political edict in China. They want to split up HSBC into a Western business and an Asian business.’

This post first appeared on Dailymail.co.uk