Business / Insurance market

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

(China Daily) Updated: 2012-11-20 10:00

HSBC said it was in talks to sell its $9.3 billion stake in Ping An Insurance (Group) Co, China's second-largest insurer, stepping up a program by Europe's biggest bank to shed non-core parts of its business to boost profitability.

The lender "is in discussions which may or may not lead to the sale of the shares," HSBC said in a statement on Monday.

The bank plans to sell all of its 1.23 billion Hong Kong-traded shares in Ping An, which represents about 40 percent of the insurance company's Hong Kong-traded shares and 15.6 percent of all Ping An stock, according reports by some local media.

"HSBC can reinvest the proceeds from the share sale in its organic business on the mainland," said Wilson Li, a Shenzhen-based analyst at Guotai Junan Securities Co. "That would actually generate more benefits than the existing investment in Ping An."

HSBC will record a pre-tax profit of up to $6.5 billion if it sells the Ping An stake, according to estimates from Mizuho Securities analyst Jim Antos.

This would help boost the lender's Tier One capital ratio up to 13.6 percent from about 13.1 percent currently, although he cautioned on the size of the deal.

"You can't sell if you can't find a buyer, because it's impossible to dump so many shares onto the market at one time," Antos said.

A sale would require approval from mainland's insurance and banking regulators, narrowing the list of possible buyers, as authorities have traditionally allowed only financial groups to take stakes in the country's major banks and insurers.

Charoen Pokphand Group, controlled by Thai billionaire Dhanin Chearavanont, is reportedly interested in buying the stake. Dhanin's net worth is estimated at $6.1 billion as of Nov. 16, according to the Bloomberg Billionaires Index.

Sheng Ruisheng, a Shenzhen-based spokesman for Ping An, said the company doesn't have any information relating to changes of shareholders.

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