(Yicai Global) April 19 -- It is in the interests of HSBC to undergo strategic restructuring so as to build a bank that will specialize in operation in Asia and can better adapt to development trends in the region, the chairman of Ping An Asset Management, one of China’s biggest institutional investors and the second-largest stakeholder in HSBC, said yesterday ahead of a shareholding meeting next month that will vote on the proposal to spin off its Asia business.

HSBC is greatly lagging behind its peers and its market capitalization is declining, said Huang Yong. The London-based bank has been slow to respond to challenges in its global business models and it has made damaging adjustments to its dividend policy.

“The new strategic restructuring plan proposed by Ping An Asset Management is to build a bank that focuses on Asia with a simplified and more flexible structure, that is better localized and more competitive, and can benefit from the development of the Guangdong-Hong Kong-Macao Greater Bay Area and the internationalization of the Chinese yuan,” Huang said.

HSBC has already accepted Ping An Asset Management’s advice on withdrawing from some businesses, improving the benchmarking system, reforming remuneration packages to senior managers, as well as restoring quarterly dividends, and these measures have helped HSBC improve its business performance recently, Huang said.

Interest rate hikes are a major contributor to HSBC’s performance, and rates are about to peak, but the performance of HSBC’s Asia operations still lags far behind its peers, he added. HSBC management is failing to solve issues such as its weak localization ability, high costs, low capital efficiency and intensified geopolitical risk.

HSBC is using funds generated by its Asian arm to support non-Asian businesses with a lower return. “We believe the spin-off of HSBC’s Asia operations will provide HSBC shareholders with a better guarantee of receiving dividends and exempt them from the poorer performance of its non-Asian businesses,” he said, adding that he is disappointed with HSBC’s refusal to communicate.

Shareholders will meet on May 5 in Birmingham to vote on the spin-off recommendation, and also on another proposal to bring dividends back to pre-Covid-levels. HSBC Chairman Mark Tucker has repeatedly rejected both proposals recently.

Shenzhen-based Ping An Asset Management is HSBC’s second-largest shareholder with an 8 percent stake as of the end of last year after US private equity giant Blackrock which holds 8.27 percent.

HSBC gave 14 reasons why it thinks the restructuring plan proposed by some other shareholders will have a destructive impact on the bank’s value. These include requiring a new and independent information technology service system, around USD40 billion worth of Minimum Required Eligible Liabilities in order to meet the minimum requirements for self-owned funds as well as billions of US dollars of refinancing costs.

Editor: Kim Taylor