HSBC in talks to sell $9bn China insurance stake

Michael Bow
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HSBC yesterday revealed it was in talks to sell its 16 per cent stake in China’s second largest insurer Ping An in a move that would bolster the bank’s capital balance sheet.

The firm said in a joint statement to the London and Hong Kong stock market it was in “discussions” with buyers over a sale.

It followed media reports in the Hong Kong Economic Journal that the stake was being pursued by CP Group, a conglomerate owned by Thailand’s richest man Dhanin Chearavanont.

A HSBC spokesman told City A.M. the bank could not reveal if advisers had been appointed to work on a deal but said valuation was “critical” to any sale. He added there was no urgent need to sell the firm.

HSBC took a stake in Ping An in 2002 and boosted its holding to 19.9 per cent in 2005, investing roughly $1.7bn in the firm, before being diluted down to a 15.6 per cent.

Ping An is China’s second biggest insurer behind Pacific Insurance Company of China Group. Its shares plummeted close to a two-month low yesterday, closing down 1.9 per cent at HK$58.50, after falling as low as $57.50.

Ian Gordon, a banking analyst at Investec, said a sale would be positive as there was a lack of strategic fit between Ping An and HSBC. He said the current stake may be sold for as much as $9.3bn.

He added the likely balance sheet gain on a sale, pegged at $2bn to $3bn, could be given back to shareholders or used to increase its 19.9 per cent stake in another Chinese business, Bank of Communications.

A sale would be in line with HSBC’s group strategy review announced in May 2011, which sought to achieve $3.5bn of savings by 2014 to streamline the bank.

HSBC’s current core tier 1 capital ratio of 9.6 per cent would be bolstered by a sale as it seeks to hit its target of 10.5 per cent. Shares closed up 2.83 per cent yesterday.