* Main installment of shares to go to CP on Wednesday
* Payment for shares made in cash - HSBC
* China Development Bank not providing financing -sources
By Lawrence White
HONG KONG, Feb 1 (Reuters) - China has approved the sale ofHSBC's remaining $7.4 billion stake in Ping AnInsurance to a group controlled by Thailand's richestman, allowing completion of the biggest equity purchase in thecountry by a foreign investor.
For HSBC Holdings Plc, the sale marks its exitfrom a decade-long interest in China's second-biggest insurerand books it a $2.6 billion post-tax gain from selling what itno longer considers a core asset.
Approval by the China Insurance Regulatory Commission (CIRC)had been in doubt after media reports last month raisedquestions over Thai conglomerate CP Group's funding for thedeal.
State-run China Development Bank (CDB) did not providefinance for the purchase, despite being lined up for fundinglast month, people familiar with the matter told Reuters.
One of the sources, who is familiar with CP Group but notauthorised to speak publicly, said the CDB credit facility wasstill in place but CP is not drawing it down as it became such apolitically sensitive issue, and it could complete the dealwithout it.
Charoen Pokphand Group (CP Group), controlled byseptuagenarian billionaire Dhanin Chearavanont, bought HSBC's15.6 percent stake in Ping An in December for $9.4 billion,agreeing to pay up front for around a fifth of that stake lastmonth, and the rest, backed by CDB, on approval by the Chineseregulator.
Payment for the second $7.4 billion tranche of shares wasmade in cash, HSBC and CP Group said in separate statements.Last month HSBC had said the second tranche would be financed inpart in cash and in part under a facility with CDB.
The first payment was supposed to be funded by wholly-ownedCP subsidiaries, but local media reports said people notdirectly tied to the Thai food conglomerate were behind thedeal, prompting CDB to voice its concerns. Thebank would likely not want to anger Beijing by being involved infacilitating a non-mainland investment in Chinese stocks.
"If, after all this news, CIRC approved the deal, itindicates (the regulator) is comfortable that CP will be theholder. This will remove the overhang on the Ping An shareprice," said Edmond Law, a China insurance analyst at UOB KayHian.
The Thai group has interests spanning poultry and animalfeed, supermarkets and auto making, and has a long history inChina as the first multinational to invest in the country'sagri-business in 1979. It was later tasked with helping tomodernise China's farm sector.
The Ping An deal was Asia's second-biggest acquisition in2012, behind Chinese oil firm CNOOC Ltd's planned$15.1 billion purchase of Canada's Nexen Inc. Foundedin 1988 as China's first joint-stock insurer, Ping An has growninto one of the world's largest, with 74 million clients, morethan 175,000 employees and an army of some 500,000 agents.
NON-CORE
The sale is part of HSBC's strategy of selling non-coreassets and shrinking in many markets to improve profitability.
But some people were worried that Europe's biggest bank willlose about $1 billion in earnings contribution that it maystruggle to replace.
"I understand strategically why they are doing it, but itwill be dilutive to returns," said Ian Gordon, analyst atInvestec Securities in London. "HSBC is short of earnings andlong of capital and after this deal its emerging capital surplus- for which it has no avenues to deploy it - becomes even morepronounced," he said.
The capital boost from the sale should underpin dividendprospects, however, and offer greater flexibility as regulatorsin Europe act tougher on banks' capital requirements.
By 1147 GMT HSBC's London shares were down 0.3 percent, inline with a slightly weaker European banking index.
Before the Ping An sale, HSBC had already sold about $6.7billion worth of assets, according to Thomson Reuters data,including non-life insurance operations and retail bankingbranches in places such as Thailand and the United States.
HSBC sold the Ping An stake for HK$59 per share, for a totalof HK$72.74 billion ($9.4 billion). The deal, given its size,was an important and sensitive sale for HSBC, and was personallyoverseen by CEO Stuart Gulliver, said a person with directknowledge of the matter.
HSBC, which spent $1.7 billion building its Ping An stakebetween 2002-05, also has a 19.9 percent interest in Bank ofCommunications, China's fifth-largest lender, and owns8 percent of unlisted Bank of Shanghai and 62 percent of HongKong's Hang Seng Bank, which in turn owns 13 percentof China's Industrial Bank.
HSBC Holdings (HSBA)
