Leading shareholder Ping An Insurance Group spearheaded the proposal to split up HSBC’s Asian and Western operations, but the idea has gained support among individual shareholders in Hong Kong.

As HSBC’s group chief executive, Noel Quinn, tried to explain the bank’s position to shareholders on Aug 2, proponents of an immediate breakup blared calls for management to step down from outside. They drove their message home with a huge banner. From inside, Quinn heard frustration and support for Ping An’s proposal.

HSBC’s management opposes the idea, which questions whether the bank’s current structure makes sense, particularly in light of geopolitical tensions between China and the West.

Ping An holds a stake of more than 8% in HSBC. One of China’s biggest financial groups, with operations ranging from banking to insurance and fintech, Ping An counts state-owned enterprises among its shareholders.

HSBC in August laid out 14 reasons it opposed the plan, including that it would take three to five years to reshape its information technology infrastructure and that approval from authorities around the world would be needed. HSBC also rejected the idea of inviting a board member from Ping An.

“International connectivity is core to our entire value proposition from clients to employees, and has contributed to our improved returns,” Quinn said.

“It has been our judgment that alternative structural options will not deliver increased value for shareholders,” he said. “Rather, they would have a material negative impact on value.”

A source close to Ping An said: “HSBC only emphasised and clearly exaggerated the downsides and challenges of spinning off its Asia business but did not mention the huge benefits and long-term value that a spinoff could create.”

“As one of their shareholders, we remain open and supportive of any measures and opinions that help improve the bank’s performance and benefits,” Ping An chief investment officer Benjamin Deng said on a Wednesday call.

“We hope its future will be better and better, yet the future direction relies upon the bank,” he said.

The breakup proposal is rooted in HSBC’s history. The bank was originally established in Hong Kong, then under British rule, in 1865 and is an issuer of the Hong Kong dollar. Though it moved its headquarters to London in 1993, the Asian market remains its main driver.

In 2021, HSBC announced plans to invest US$6 billion in its Asian business over the next five years. It also decided to sell its retail business in France and to move some executives to Hong Kong from London.

Its profits in Asia have been offsetting losses in Europe for years. Asia generated about 70% of its pretax profit for the January-June half. Ping An estimates that spinning off HSBC’s Asian business and listing it in Hong Kong would boost shareholder value by US$25 billion to US$35 billion.

HSBC’s suspension of its dividend in 2020, based on a push by British regulators, added to tensions between the bank and its shareholders.

“The profits generated in Asia were allocated to subsidise the loss suffered in Europe and America” instead of benefiting shareholders, said investor Ken Lui, founder of the Spin Off HSBC Asia Concern Group, in an open letter to management.

Breaking up the bank will “unleash a potential value of $200 billion Hong Kong dollars which may benefit the value of the bank as well as its dividend policy,” he wrote.

The proposal requires support from at least three-fourths of HSBC shareholders and is considered unlikely to move forward at this point. “I have reservations about whether the spinoff can add value to the bank,” said Banny Lam, head of research at CEB International Investment, acknowledging HSBC’s concerns over potential costs.

Quinn said: “We believe the discussions between ourselves and Ping An have been purely around commercial issues.” Still, some see a political motive behind the breakup proposal as China strengthens its grip on Hong Kong, which critics says threatens the “one country, two systems” policy underpinning the city’s autonomy.

CY Leung, a former Hong Kong chief executive and a prominent Beijing supporter, has said Hong Kong’s largest commercial bank should not be supervised by British authorities.

Christine Fong, a politician who represents more than 500 small investors in HSBC, also supports the plan and called the bank’s executives “full of excuses”.

“Around 80% to 90% of the board directors are from Europe or the US … The Asia-Pacific region has no voice,” she said.

HSBC’s loyalties have been tested by Hong Kong’s shifting political landscape. One of its executives expressed support for the sweeping national security law imposed on the territory by Beijing.

The bank froze accounts tied to Hong Kong pro-democracy activists, while its brokerage unit on the mainland installed an internal Communist Party committee. This June, China’s official Xinhua News Agency quoted Quinn as saying that HSBC would invest more than 3 billion yuan (US$438 million at current rates) in China between 2020 and 2025.

HSBC branded itself as “the world’s local bank” in the early 2000s, establishing branches worldwide to reap the benefits of globalisation. As tensions between the US and China and the war in Ukraine threaten to split the global economy into blocs, the foundations of HSBC’s model are under stress.