HSBC brushes aside Hong Kong investor’s Asia spin-off proposal

By Selena Li

HONG KONG (Reuters) -HSBC Holdings PLC on Monday pushed aside a proposal by an activist shareholder in Hong Kong to spin off its mainstay Asia business, reiterating the adverse impact on the Asia-focussed bank’s cost and clients.

Addressing an informal meeting of shareholders in Hong Kong, its biggest market, HSBC Chairman Mark Tucker said the board was unanimous in recommending that shareholders vote against proposals to restructure the bank and pay fixed dividends.

The comment came as Ken Lui, an individual HSBC shareholder and leader of a Hong Kong-based investor group, called for the break up of the bank. His second proposed resolution calls on HSBC to restore pre-COVID-19 dividend levels.

Tucker told the shareholders a restructuring or spin-off of its Asia business, as demanded by Lui, would create a major period of uncertainty for clients, and employees and shareholders would be disrupted.

“In fact, 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 told hundreds of the bank’s individual investors, urging the attendees to cast their vote outside of the meeting hall.

About 1,100 attendees at an exhibition centre in Hong Kong’s Kowloon Bay district were greeted with banners put up by supporters of the breakup campaign saying: “spin off HSBC Asia now”.

The Hong Kong meeting is being held ahead of HSBC’s main annual general meeting in the British city of Birmingham on May 5, to discuss its 2022 results and “other matters of interest”, an earlier notice shows.

Lui’s proposals, which will come up for vote during the meeting in May, echo calls by HSBC’s largest shareholder, Ping An Asset Management, to demerge its Asia unit, which accounts for the bulk of its revenue and profit.

HSBC has in recent months pushed back on Ping An’s proposal, a move Europe’s biggest bank by assets has said would be costly, while posting profits that beat expectations and promising chunkier dividends.

Higher dividends

The demand for spinning off HSBC Asia business has come amid rising geopolitical tensions between China and the West, though its chief executive, Noel Quinn, has said he does not believe Ping An’s campaign was politically motivated.

On Monday, a Ping An Asset Management spokesperson said the Chinese firm hoped HSBC valued the shareholders’ suggestions.

“After a preliminary study of some of the resolutions proposed by HSBC shareholders, we believe that these resolutions will have a positive impact on improving performance and enhancing shareholder value.”

On Lui’s demand for higher dividends, Quinn told the Hong Kong shareholders that the London-headquartered bank intended to get the payouts back to pre-COVID level as soon as possible.

However, he said that a fixed dividend was “not financially sensible or workable”.

Lui, who attended the Monday meeting wearing a ribbon with spinoff slogan on it, said he believes there are no reasons for the bank’s shareholders to vote against the two proposals.

“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,” Lui said, after presented a screenshot as evidence of his holding of HK$100 million ($12.74 million) worth of HSBC shares.

Lui said he is “very confident” that the proposals, which require support from 75% of the voters, will be passed at the AGM.

The group is working with proxy engagement advisers to conduct “targeted reachout” to institutional shareholders and in Hong Kong it plans to go around the 18 local districts to rally support.

London-listed shares of HSBC were up 1.98% as of 1145 GMT on Monday.

($1 = 7.8499 Hong Kong dollars)

(Reporting by Selena Li; Editing by Sumeet Chatterjee and Christopher Cushing)