HSBC Confirms Sale of Ping An Insurance Stake to Thai Group

on Dec 5, 2012

Today HSBC (LON:HSBA) officially confirmed its divestment of its stake in the Chinese insurer Ping An with the purpose of reviving profits and boosting capital.

**Ping An Sale**
Europe’s biggest bank by market value has struck a $9.4 billion (£5.83 billion) deal to sell its entire 15.6 percent stake in Ping An Insurance (HKG:2318) to the Thai Charoen Pokhpand Group (CP). According to the Financial Times the British lender will make a $3 billion (£1.86 billion) profit over the last valuation in 2011.
HSBC will first transfer 20 percent of its stake to the CP Group with the rest only after the China Insurance Regulatory Commission approves of the deal. The unlisted Thai conglomerate run by billionaire Dhanin Chearavanont will fund the purchase of the first tranche of shares with cash while the remaining 80 percent will be paid via a combination of cash and debt from the China Development Bank.

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The transaction will bolster HSBC’s core Tier 1 capital ratio by 50 basis points and its total capital ratio by 100 basis points. The British lender has spent $1.6 billion (£993 million) since 2002 in building up its stake in Ping An, which was subsequently diluted after the UK bank didn’t participate in a stock offering in 2011.
“The stake disposal by HSBC [comes] as no surprise given the disposal has been widely speculated in recent months and that HSBC has been selling its insurance assets,” said Darwin Lam, an analyst at Citi, as quoted by the FT.

!m[Europe’s Biggest Bank Expects a Profit of Almost $3 Billion from the $9.4 Billion Deal](/uploads/story/963/thumbs/pic1_inline.png)The buyer CP Group, whose products include feed for chickens and pigs, was the first foreign company to invest in China’s agricultural business in 1979 and, under Beijing’s five-year plan, was tasked with modernising the farming sector. The group has more than 100 affiliated companies with operations ranging from auto-parts manufacturing, entertainment, and retail operations including its chain of Lotus supermarkets in Shanghai and 7-Eleven convenience stores in Thailand.

Ping An’s share price went up by 5.46 percent at 14.50 Hong Kong Time – its biggest advancement in six months.
HSBC’s most important holding in China is its 19.9 percent stake in Bank of Communications, the country’s fifth biggest bank. The British lender has been willing to expand its stake if given regulatory approval but such approval remains unlikely as foreign banks are capped at 20 percent ownership of domestic financial institutions.

Stuart Gulliver, chief executive of HSBC, said on Wednesday that the bank will remain committed to Chin, which is one of its “key markets”.
**Selling Toxic US Debt**
Over the weekend the Telegraph reported that HSBC is planning to sell four sub-prime loan portfolios with a total value of $2.7 billion (£1.67 billion). This will be the first time since the 2008 financial crisis HSBC has sold any of its holdings of sub-prime debt and according to experts the move is going to unleash the subsequent sale of the entire $44.2 billion (£27.42 billion) of toxic debt.
The sale will free up billions of dollars in capital held by HSBC against the toxic loans. The debt is expected to be sold in parcels of around $450 million to $750 million (£279-£466 million), with hedge funds already expressing an interest.


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