HSBC was ‘challenged’ on merits of a break-up, says bank chief
HSBC chief executive Noel Quinn has said he was “challenged” by external advisers about a potential break-up of the bank but ultimately concluded it would be “a net negative”.
Mr Quinn said HSBC had carried out “detailed analysis of strategic options” after intense pressure from its largest shareholder, Chinese insurer Ping An, and a number of Hong Kong-based retailer investors to split the bank in two.
“When one of your largest shareholders presents a view of the strategy that is different to your view as a management team, you’ve got to take that seriously – and as you’d expect, we have,” Mr Quinn said.
“As a consequence of what was covered in the press earlier this year, we refreshed that analysis. I wanted to make sure we, the management team, refreshed that with the benefit of external advice,” he said at a conference hosted by Bank of America in New York on Tuesday.
“I wanted to be challenged. I wanted some analysis. I wanted external parties – investment banks and legal advisers – to make sure we’d done a good job.”
HSBC received advice from both Goldman Sachs and Robey Warshaw, a boutique investment bank where former UK chancellor George Osborne is a partner.
Mr Quinn said management had “taken the board through all that work” but concluded a break-up was “a net negative”.
“As I said at the half-year mark, we’re very firmly of the view that breaking up the bank is not the right strategic option to create value,” he said. “Continuing on the strategy we currently have is the best and safest way to generate enhanced returns, dividends, and profitability.”
Ping An has lobbied HSBC to spin-off its Asian operations, arguing it would unlock up to $35bn of value and release it from $8bn in capital requirements.
The bank has said that its current – and best – business strategy is to pitch itself as a conduit for trade between China and the West, through its operations in Hong Kong. HSBC posts around 90pc of its profits in east Asia, much of it through Hong Kong and mainland China.
Mr Quinn said: “Breaking up the bank – which is a hugely internationally connected bank – would create significant revenue, cost, and funding dissynergies.”
