--HSBC in talks to sell its stake in China's Ping An Insurance

--Sale could net the bank $7.5 billion

 
  By Jeffrey Ng 
 

HSBC Holdings PLC (HBC) is in talks to sell its stake in China's second-largest insurance company in a deal that could net the bank a profit of $7.5 billion.

The U.K. bank, which has been under pressure to boost returns, said it is negotiating with an unnamed potential buyer for its 15.6% stake in Ping An Insurance [Group] Co. of China (2318.HK). The stake would be worth $9.17 billion at current prices.

U.K.-based HSBC said in a statement Monday it has "from time to time received approaches regarding its shareholding and confirms that it is in discussions which may or may not lead to the sale of the shares." HSBC said it will make further announcements "if or when appropriate."

A Ping An spokesman on Monday declined to comment.

The talks were first reported by the Chinese-language Hong Kong Economic Journal, which cited unnamed sources saying that Charoen Pokphand Group, which is backed by Thailand businessman Dhanin Chearavanont, may be one of the parties interested in buying the stake. The company didn't respond to a request for comment.

The sale talks were likely prompted by regulatory requirements that take effect next year and make holding stakes in financial institutions especially onerous from a capital standpoint. In recent months, other Western banks like Citigroup Inc. have been disposing of minority stakes in banks in Asia.

In midday trading in Hong Kong, Ping An shares were down 2.9% at HKD57.90 and HSBC was up 0.8% at HKD74.55.

While Ping An shares are down this year, the market value of HSBC's stake in Shenzhen-based Ping An is nearly six times the price the bank paid for the investment a decade ago. HSBC first bought a 10% stake in Ping An in 2002 for $600 million, two years before the insurer's Hong Kong listing, and is the single-biggest shareholder of the company. It bought an additional 9.91% stake in 2005 for US$1.04 billion. Its stake was diluted following a 2011 share placement.

Under new bank regulations known as Basel III, lenders are required to keep higher capital buffers to absorb potential financial stress, while banks with investments in financial institutions also need to set aside additional capital as a prudential requirement.

Citigroup Inc. in March sold its remaining stake in Shanghai Pudong Development Bank. In February the U.S. bank also sold its entire stake in Indian lender Housing Development Finance Corp.

HSBC has several strategic investments in China, apart from the Ping An stake. It also has a 19% stake in China's Bank of Communications Co., which is worthS$9.78 billion. HSBC's 62%-owned unit Hang Seng Bank Ltd. has a 13% stake in Industrial Bank Co.

Ping An is China's second-largest life insurer by premiums after China Life Insurance Co.

Write to Jeffrey Ng at Jeffrey.Ng@dowjones.com

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