A move to split up HSBC Holdings PLC and create a Hong Kong-based bank would take up to five years, incur billions in costs and destroy HSBC's benefits as one of the world's few truly global banks, executives said.

Senior HSBC management presented first-half earnings from Hong Kong and set out their case against creating a separate Asia-focused bank based there, which its biggest shareholder, Ping An Insurance (Group) Co. of China Ltd., has called for.

"Very few banks can rival our ability to connect capital, ideas and people from a global network that facilitates the international collaboration required to succeed in today's world," said Chairman Mark Tucker.

China-based life insurer Ping An has an 8.3% stake in HSBC, according to S&P Global Market Intelligence data, and has reportedly presented a plan to break up the London-headquartered bank to the lender's board. Ping An has said it supports all reform from investors that can help create long-term value.

Connected operations

Ahead of an investor day in Hong Kong on Aug. 2, HSBC's presentation of results focused on the benefits of remaining a globally structured bank.

Collaboration between the bank's investment banking operations and its commercial banking business was a priority, said CEO Noel Quinn. The proportion of business booked in the East but which originated in Europe and the Americas grew by about 8% from the same period last year, which underlined the strength of its connected operations, he said.

About 45% of its $20 billion wholesale banking client business is booked cross-border, Quinn said.

Separating the bank would incur considerable costs, HSBC management said. A new stand-alone IT system would likely cost billions of dollars and take three to five years to construct. HSBC would also need to ensure a new entity was properly capitalized. Any such bank would lose the tax benefits HSBC has by being headquartered in the U.K., CFO Ewen Stevenson said.

Dividend policy

Dividends have been a particular concern for Hong Kong-based shareholders, where the bank has a high level of retail investors, some of who have supported Ping An's proposals. The bank came under sustained criticism in Hong Kong after it suspended the dividend in 2020 during the pandemic at the request of the Bank of England.

HSBC said there would be a 50% dividend payout ratio for 2023 and 2024, and it would restore the dividend to pre-COVID-19 levels as soon as possible. It will also resume quarterly dividend payouts in 2023.

The bank expects to generate $37 billion of net interest income in 2023, compared with the $31 billion it expects for 2022, as central bank interest rates rise. Its second-quarter net interest margin was 135 basis points, up 16 basis points compared with the fourth quarter of 2021.

HSBC's transformation to focus on Asia is on course, the bank said. The bank is listed both in London, where it is headquartered, and in Hong Kong, where it makes about two-thirds of its pretax profit.