HSBC versus Asian shareholders: Bank’s chiefs warn Hong Kong investors against ‘risky’ break-up
HSBC’s top brass hit back at shareholder proposals to spin off the bank’s Asian business and pay fixed dividends, as it sought to quieten shareholders’ discontent about the bank’s business model.
At a meeting of investors in Hong Kong, Reuters reported that HSBC chair Mark Tucker warned a restructuring or spin-off of HSBC’s Asia business would create major uncertainty.
He told investors that the bank’s board was unanimous in recommending shareholders vote against proposals to restructure the bank.
“There will be significant cost over a number of years with material execution risks. So it would not be in your interest to split the bank,” Tucker said, according to Reuters.
The comments came after a group of investors led by Ken Lui demanded that the bank table a shareholder vote on a demerger. HSBC bowed to the pressure last week.
The bank also dismissed proposals put forward by Lui to pay fixed dividends. Chief executive Noel Quinn said the proposal was “not financially sensible or workable”.
The meeting in Hong Kong comes ahead of HSBC’s AGM in May, where shareholders will vote on the spin-off motion.
HSBC has faced extensive shareholder pressure over the past few months to demerge its Asian business. HSBC’s largest shareholder, Chinese insurer Ping An, has publicly called for the bank to break up its business.
Lui’s group of investors claim to be acting independently of Ping An.
Speaking after the meeting, Lui said: “I want to tell the world that the shareholders of HSBC have independent thinking and will not let the board of directors say what to do.”
The Asian business generates most of the bank’s profit, but shareholders are concerned that it is being held back by other underperforming parts of the business around the world.
The calls gathered momentum after British regulators prevented banks from handing out dividends during the pandemic. That decision starved Asian shareholders of dividends, provoking a backlash from retail investors in Hong Kong.
Many are also concerned that HSBC’s attempt to straddle east and west will become increasingly untenable as relations between the two deteriorate.
In its most recent quarterly results, HSBC promised extensive payouts – including a $0.21 special dividend – after delivering $5.2bn in profit, ahead of market expectations.
Discussing the results, Quinn said “international connectivity remains our greatest strength”.