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

HSBC Holdings rejects proposal to spin off Asia business.

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

Monday's rejection by HSBC Holdings of a proposal from an activist shareholder in Hong Kong for the spin-off of its mainstay Asia business was a sign that HSBC Holdings is not going to accept it. This reaffirms the negative impact on clients and costs at the Asia-focused bank.

Mark Tucker, Chairman of HSBC, addressed a meeting of shareholders in Hong Kong. This is its largest market. He stated that the board unanimously recommended that shareholders vote no to proposals to restructure the bank or pay fixed dividends.

Ken Lui, a Hong Kong-based shareholder of HSBC, made the comment. He is also the leader of a Hong Kong investor group. His second resolution requests that HSBC restore pre-Covid-19 levels of dividends.

Tucker informed shareholders that a restructuring of the Asia business or spin-off, as requested by Lui would cause a significant period of uncertainty for clients and employees, and would disrupt shareholders and shareholders.

"In reality, there will be substantial cost over a number years with material execution risk. Tucker explained that it was not in your best interest to split the bank. He urged hundreds of individual investors to vote outside the meeting hall.

Around 1,100 people gathered at an exhibition center in Hong Kong's Kowloon Bay District to be greeted by banners from supporters of the campaign for breakup. They read: "Spin off HSBC Asia Now"

An earlier notice indicates that the Hong Kong meeting will be held before HSBC's annual general meeting in Birmingham, England on May 5. It will discuss HSBC 2022 results as well as "other matters of importance".

Lui's proposal, which will be up for vote at the May meeting, echos calls by HSBC’s largest shareholder, Ping An Asset Management to demerge its Asia unit which accounts for most of its revenue.

HSBC has resisted Ping An's offer in recent months, a move Europe’s largest bank by assets has claimed would be expensive. However, HSBC posted profits that exceeded expectations and promised chunkier dividends.

Higher dividends

The rising geopolitical tensions between China, the West and HSBC Asia have prompted the demand to spin off the business. However, Noel Quinn has stated that he doesn't believe Ping An's campaign is politically motivated.

A spokesperson for Ping An Asset Management said Monday that the Chinese firm hoped HSBC would value the suggestions of shareholders.

"We believe these resolutions will have a positive effect on performance and shareholder value after a preliminary analysis of some of the proposals made by HSBC shareholders."

Quinn informed Hong Kong shareholders about Lui's request for higher dividends. Quinn stated that the London-based bank would return the payouts to pre-Covid levels as soon as possible.

He said, however, that a fixed dividend was not financially feasible or practical.

Lui, who wore a ribbon with a spinoff slogan on his neck, attended Monday's meeting and stated that he believes there is no reason for shareholders of the bank to vote against these proposals.

Lui stated, "I want the world to know that the shareholders at HSBC have independent thought and will not allow the board of directors to dictate what to do." He presented a screenshot to prove his ownership of HK$100m ($12.74 million) of HSBC shares.

Lui stated that he is confident that the AGM will approve the proposals which need support from 75% voters.

The group has been working with proxy engagement advisors to carry out "targeted reachout" to institutional shareholders. In Hong Kong, it plans to visit the 18 local districts in order to rally support.