HSBC in talks to sell $9b Ping An Insurance stake

HSBC spent $1.7 billion to build up a 15.6 percent stake in China's second-largest insurer in 2002 and 2005, but a sale has been widely expected as part of its three-year recovery plan in the wake of the 2008 financial crisis and regulatory reforms.

HSBC Chief Executive Officer Stuart Gulliver's attempts to cut costs have been hampered by probes into money laundering and compensation claims, increasing pressure for asset sales. The London-based lender agreed to sell some general insurance units in Asia and Latin America earlier this year.

The lender has announced 41 disposals and closures since the start of 2011, and the potential Ping An sale fuelled speculation about other assets that are not core to its day-to-day business operations.

"This makes sense for HSBC because it's been disposing of so many of its non-core businesses," said Ivan Li, an analyst at Maybank-Kim Eng in Hong Kong. "The question that everyone has will be on HSBC's stake in Bank of Communications."

HSBC owns 19.9 percent of Bank of Communications (BoCom), China's No.5 lender, worth about HK$79 billion ($10.2 billion), according to Thomson Reuters data.

"It's not reasonable for them to dispose of Ping An because first of all, this is a key profit contributor to HSBC," said Steven Chan, an analyst at Citic Securities International Co. in Hong Kong. The gain in HSBC shares signals that some investors are betting "there could be a special dividend if they dispose of Ping An."

The insurer's third-quarter profit rose 21 percent to 2.13 billion yuan as its banking unit contributed more revenue and premium income expanded. An 18 percent increase in Ping An Bank Co.'s profit helped Ping An Insurance Chairman Peter Ma buffer the effect of a slump in the value of the insurance company's equity holdings as China's economy cooled.

Ping An shares fell as much as 3.5 percent in Hong Kong trading, the biggest drop since July 23, before narrowing the loss to 1.9 percent at the close of the trading day. Shares of HSBC closed up 0.9 percent.

Agencies - China Daily