HSBC offloads Ping An stake for over nine billion dollars

Global banking giant HSBC is to receive over nine billion dollars from the sale of its stake in Chinese insurance giant Ping An Insurance, the company announced on Wednesday morning.

HSBC owns a 15.57% stake in Ping An, China's second-largest insurance firm by assets, and is selling its interest to a Thailand-based conglomerate Charoen Pokphand Group (CP Group) for HK$72.74bn, equal to around $9.39bn, in cash.

Specifically, the stake will be sold to a collection of CP Group's subsidiaries: All Gain Trading, Bloom Fortune Group, Business Fortune Holdings and Easy Boom Developments.

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The transaction comes just a few weeks after HSBC revealed that it was looking to sell its stake in Ping An. The bank said that the rationale for the sale was simply the execution of its strategy to "deliver sustainable long-term value to shareholders".

HSBC said that the carrying value of its interest in Ping An at the end of 2011 stood at $6.37bn and the share of profits attributed to HSBC's investment in 2010 and 2011 was $848m and $946m, respectively.

The post-tax gain on the sale of HSBC's shares in Ping An is expected to be around $2.6bn, which is equal to the sale price minus the carrying value of the investment, foreign exchange differences and tax effects.

Commenting on the deal, HSBC's Chief Executive Officer Stuart Gulliver said: "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 said that the deal would strengthen its core tier-1 capital ratio by around 0.5% and the total capital ratio by 1% (based on September 30th ratios). The bank's core tier-1 ratio at the end of September stood at 11.7% while the total capital ratio was 15.6%.

The group added: "The proceeds will be used as capital in support of the further implementation of overall HSBC Group strategy."

The deal is conditional on the approval from the China Insurance Regulatory Commission.