HSBC should aggressively cut costs, shareholder Ping An Insurance says

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Ping An Insurance (OTCPK:PNGAY) (OTCPK:PIAIF) has urged HSBC (NYSE:HSBC) to be more aggressive "in radically reducing its costs to close the huge cost-income ratio gap" between HSBC and its peers, the Chinese insurer said Friday in a statement.

HSBC (HSBC) shares rose 4.2% in U.S. premarket trading.

The HSBC shareholder said HSBC's (HSBC) cost-income ratio, at 64.2%, is 13 percentage points higher than an equivalent peer group mean. HSBC Asia's cost-income ratio is 58.7% is 18 pp higher than the 40% mean of an equivalent Asia banking peer group, it pointed out.

Specifically, the company believes HSBC (HSBC) should reduce operating costs including headcount and IT and global headquarters costs as a percentage of revenue.

"This is the most important, urgent and absolutely needed action for HSBC to improve its business performance, reducing costs and increasing efficiency, particularly amid slowing growth in the global financial industry," Ping An (OTCPK:PNGAY) said.

The shareholder also urges HSBC (HSBC) to allocate its global resource more effectively. HSBC Asia contributed 68.7% of total pretax profit in H1 2022, compared with Europe and North America contributing less than 10% and Latin America less than 5%, Ping An (OTCPK:PNGAY) said. Meanwhile, in the past HSBC's allocation strategy has had the Asian business compensate its European and American businesses, the company said.

"We suggest HSBC (HSBC) to review its global resource allocation strategy, reallocate more resources to Asia to gain higher return, and exit sub-scale peripheral ex-Asian market."

In June, the U.K.'s Sunday Times reported that Ping An (OTCPK:PNGAY) commissioned research that found that HSBC (HSBC) could generate addition ~$26.5B in shareholder returns if it spins out its Asian business.

See why SA contributor Pearl Gray Equity and Research remains cautious on HSBC.