Ping An Insurance Group Co. is weighing options that would allow it to reduce its 8% stake in HSBC Holdings Plc, according to people familiar with the matter.
One option an internal team at the Chinese insurance giant is considering is further share sales, similar to the US$50 million ($67.34 million) sale it disclosed last week, as it seeks to reduce its US$13.3 billion position in Europe’s largest lender, the people said, declining to be identified as the deliberations are private.
A sovereign wealth fund or ultra-rich investor in the Middle East taking a sizable stake is another possibility, some of the people said. It’s unclear whether there have yet been formal talks about a larger sale of the stake and how feasible it would be, although members of the insurer’s board are currently visiting the Gulf, two of the people said.
The openness to reducing its stake reflects Ping An’s desire to lock in some profits from its investment and a recognition that the more dramatic changes it has pushed for at HSBC currently stand little chance of succeeding.
Ping An Asset Management, the firm’s investment unit, reiterated on Friday that HSBC is a long-term financial investment. “The bank has maintained unique competitive advantage in Asia,” it said in an e-mailed statement. “We’re confident of its long term development.”
HSBC declined to comment.
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HSBC shares have risen about 15% in the past year in London and earlier this month hit their highest level since 2018.
Should Ping An “decide to reduce its position, we believe this would likely be over a prolonged period in order to maximise value, which would therefore mitigate the impact of any overhang risk,” Andrew Coombs, Michael Zhang and Rajkumar Choudhary at Citigroup Inc., wrote in a note.
Ping An has had a contentious relationship with HSBC in recent years as it campaigned for the bank to embark on a series of reforms, including spinning off its Asian arm. Those efforts were largely defeated at a meeting of the bank’s shareholders last year.
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Earlier this month, the insurer lodged a futile protest vote against CEO Noel Quinn at the company’s annual shareholder meeting just days after he surprised the business world with the announcement that he would retire from the lender.
CEO search
HSBC is now leaning towards appointing its next CEO from a shortlist of internal candidates, including Chief Financial Officer Georges Elhedery and Nuno Matos, head of wealth and personal banking, Bloomberg News reported this week.
During the insurer’s ownership of the stake, HSBC has had four chief executives who have all had to navigate the deterioration of ties between China and the US.
Asset managers are increasingly looking to sidestep those tensions as they make new investments. Temasek, a major investor in HSBC’s rival Standard Chartered Plc, has said it will focus on investing in companies with large, domestic-focused businesses as it seeks to avoid those risks.
This month, Ping An’s asset management arm sold US$50 million of HSBC shares, decreasing the insurer’s stake in HSBC from 8.01% to 7.98%. It was the first time Ping An disclosed that it’s disposed of the stock since the company began its campaign against the bank.
Ping An emerged as a major shareholder in HSBC in 2017. In September 2020, the company scooped up 10.8 million shares of HSBC at an average cost of HK$28.2859 apiece. At the time, the lender’s shares were under pressure because it was participating in a US probe of Huawei.
Citi estimates Ping An’s average purchase price of HSBC shares at close to about HK$50 vs current the share price of about HK$70.
The firm’s stock has soared since then as investors cheered Quinn’s efforts to shed non-core assets and boost returns.
