HSBC Liquidates $9.4 Billion By Sell-Off

PUBLISHED: 06 Dec 2012 @ 01:47 | Comments (0) | More info about Lou Gutheil

HSBC (LSE:HSBA) is l iquidating its entire stake in Ping, an Insurance Group of China for nearly $9.4 billion (£5.84 billion).

As a result of the sale, HSBC’s core tier 1 capital ratio will increase by 0.5% whilst its total capital ratio will be bolstered by 1.0%. Those ratios as at 30 September 2012 were 11.7% and 15.6% respectively. The sale of its 15.57% stake in Pin An is part and parcel of the banks continuing overall strategy to stabilize and re-position itself following the banking crisis and to have a cash supply sufficient to pay potential fines assessed for its involvement of money laundering for drug cartels. Whatever portion might be set aside for that purpose will be added to the £1.5 billion already on reserve.

The sale price represents a 2% premium on the Ping An closing share price of HKD$57.65 (£4.6) as at 04 December. This is a smart play for HSBC. It paid $600 million (£372.9 million) for its initial 10% stake in Ping An followed by the acquisition of an additional 9.91% stake in 2005 for $1.04 billion (£646 million). Including dilution and accumulated profit, HSBC will realize a six-fold gain through the sale.

The sale will be consummated in two steps, the first of which could be complete by 07 December. That will involve one-fifth of HSBC’s stake. The bank expects the balance of the sale to be complete before 01 February 2013.

HSBC share price was up 4.60 pence today to 640.80. The current market capitalization of the bank at £117.852.37 million looks extremely good compared to 30 December 2011 when it was £99,966.48 million.

An analyst in Hong Kong observed that “This is phenomenal for HSBC shareholders because the bank is now sitting on at least $8 billion in profit. With this sale, the company has liquidated $15.7 billion (£9.76 billion) so far in its quest to shed non-core assets.

HSBC CEO Stuart Gulliver said of the sale, “This transaction represents further progress in the execution of the Group’s strategy. China remains a key market for the Group and we will strengthen our focus on growing our own operations and building on our long-term strategic banking partnership with the Bank of Communications.”

HSBC was trading at 518.00 as at 05 December 2011. It’s current price as at 14:00 today is 641.40. The share price has traded above its 90-day moving average all for all but one day since 01 August this year.

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.