From Breakingviews - It’s time HSBC’s top owner calms down or sells up
Quinn has just added more heft to the bank’s defence, too. On Tuesday the bank reported a stunning 19.3% annualised return on tangible equity for the first quarter, a result on par with top Asian lenders like Singapore’s DBSIt sends a strong message: letting Quinn get on with his turnaround, including disposing of low-returning businesses in Canada and Europe, is working.
Ping An’s best option is to peacefully reap the benefits of Quinn’s work, and to rejoin the fray if he can’t sustain the improved performance. That might address one of the root problems in the standoff: the bank’s total return to shareholders has lagged the Chinese insurer’s Hong Kong and mainland China stock since 2015, the year it initially bought into the bank.Failing that, exiting HSBC would be the best outcome.
There are broader issues to consider, too. HSBC is well capitalised today but it can be dangerous for any large systemically important global bank to have an unhappy shareholder, especially if investors ever felt that were any block to raising funds: It took one negative comment from Saudi National BankAnother negative side effect of the standoff is the impact on Hong Kong.
Ultimately, though, the battle comes down to a fundamental disagreement between Ping An and HSBC about what the bank should be: an Asian one or a global one. That leaves little room for compromise, especially now that HSBC has a stronger hand on the valuation argument. If Ping An wants to own a regionally focused lender, there are plenty others for it to choose from.
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