HSBC has agreed to sell its stake in China’s Ping An Insurance Group to Thai billionaire Dhanin Chearavanont for $9.4bn, reaping a $2.6bn profit.
Chearavanont, who is also chairman and CEO of Charoen Pokphand, will buy the shares through three indirect wholly owned units, HSBC said. The transaction will take place in two phases, with the first to be completed by 7 Dec. China Development Bank, a policy lender, will finance part of the deal through its Hong Kong branch, according to a statement.
"The stake sale comes at a good time for HSBC," Sandy Mehta, Hong Kong-based chief executive officer of Value Investment Principals, told Businessweek. "Any moves in which banks are realising and cashing in on investment gains and augmenting their capital position is sound strategy, given global uncertainties and ongoing regulatory and capital pressures banks are facing."
"This transaction represents further progress in the execution of the group’s strategy," Stuart Gulliver, HSBC’s chief executive officer, said in the statement. "China remains a key market for the group," he said, adding that HSBC will build its strategic partnership with Bank of Communications.
The sale marks Gulliver’s 37th divestment as he seeks to cut costs by as much as $3.5 billion by 2013 and boost returns by selling assets to focus on growing economies in which the bank has the greatest market share. The lender is cutting 30,000 jobs and agreed in March to sell some of its general insurance units in Asia and Latin America for about $914 million.
"Slowly but surely, Stuart Gulliver is refocusing HSBC back to its core strength of commercial banking," Adam Chan, a Hong Kong-based analyst at CCB International Securities, commented. The CEO is "making the tough choices necessary to execute on the strategy he laid out 18 months ago".