Chinese Insurer Ping An Becomes No. 2 Shareholder at HSBC -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 8, 2017).

One of China's biggest insurers has become the second-largest shareholder of HSBC Holdings PLC, but it won't influence how the U.K.-based bank is run, HSBC's departing Chief Executive Stuart Gulliver said Thursday.

Ping An Insurance (Group) Co. of China Ltd.'s investment is a financial move and not a strategic one, Mr. Gulliver told reporters at an event in Shenzhen, after the Chinese insurer said late Wednesday that its stake in HSBC rose to more than 5%.

Mr. Gulliver said the bank welcomed the investment and had been having regular conversations with Ping An, which began building its stake in the second quarter of last year. The investment by Ping An's asset-management unit, which wasn't funded by the insurer's equity, makes Ping An HSBC's second-largest shareholder after BlackRock Inc.

The world's largest insurer by market capitalization said it bought a total of 1.02 billion HSBC shares through the southbound Stock Connect program, which allows mainland Chinese companies to buy Hong Kong-listed shares. Ping An said the investment was driven by HSBC's dividends and reflects its principle of matching assets and liabilities.

The investment also marks a reversal of Ping An's ties with HSBC, which in 2012 sold its 15.6% stake in the insurer to a conglomerate controlled by Thai tycoon Dhanin Chearavanont for $9.39 billion.

Mr. Gulliver also outlined HSBC's growth plans for southern China's Pearl River Delta region, which is the focus of the bank's Asia strategy. HSBC plans to employ about 5,000 staff at its branches in Guangdong province by 2020, more than double its current head count.

Separately, HSBC will boost head count at its newly established securities joint-venture in China to about 300 employees, from about 100 currently. The joint venture with Qianhai Financial Holdings Co., in which HSBC owns a 51% stake, allows the bank to underwrite initial public offerings and trade securities and bonds.

The planned expansion in China is part of the bank's pivot to Asia announced in 2015. Mr. Gulliver said he expects the Pearl River Delta region to add $1 billion in profit before tax in the next five years, and generate annual profit before tax of $500 million subsequently.

HSBC Qianhai Securities Ltd. is expected to provide a positive return on equity in five years, Mr. Gulliver said during the joint-venture's launch Thursday, but declined to provide figures.

HSBC was the first foreign bank to win approval to operate a majority-owned joint-venture securities company in China. It did so under a special arrangement for Hong Kong-funded financial institutions. Last month, however, Chinese authorities said all foreign companies would be allowed to hold majority stakes in Chinese securities firms, a move long awaited by Wall Street.

Mr. Gulliver brushed off suggestions of emerging competition from Western banks, saying HSBC has a head start in getting its joint venture off the ground and hiring staff.

--Joanne Chiu in Hong Kong contributed to this article.

Write to Julie Steinberg at julie.steinberg@wsj.com

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December 08, 2017 02:47 ET (07:47 GMT)