Funding threat to $10bn HSBC insurance sale

Tim Wallace
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SALE of HSBC’s stake in a major Chinese insurer could be at risk of collapsing, it emerged yesterday, as the bank funding the purchaser could pull out of the deal.

Thai conglomerate Charoen Pophand (CP) Group is part way through acquiring HSBC’s 15.6 per cent stake in Chinese insurer Ping An for $9.4bn (£5.96bn).

CP Group received 20.8 per cent of the stake last month, but the purchase of the remainder relies both on approval from the regulator and on funds from the China Development Bank – which is rumoured to be considering pulling the loans.

HSBC’s shares fell 0.48 per cent yesterday.

But analysts said any breakdown of the deal would in fact be a good development for HSBC as shares in Ping An have risen since the deal was struck, meaning the bank could now sell for a better price.

“If this does happen, it is probably good for HSBC – they agreed the deal at a share price of HK$59, and yesterday the price was HK$68,” said Ian Gordon from Investec.

“So in effect the bank is locked into an out-of-the-money deal. But it seems HSBC’s share price fell on the rumours because the markets do not like uncertainty.”

The sale is part of a wider strategy to offload non-core assets. But Gordon also warned the bank is already overcapitalised, with too few opportunities to make good use of the proceeds of the sale, dampening the group’s prospects in the short term.

HSBC declined to comment while CP Group and the China Development Bank were unavailable.