HSBC investors reject minority shareholders’ proposal to spin off Asia business, raise dividend payouts

Minority shareholders had called for the bank to consider radical change, including an overhaul of its structure
Ping An, HSBC’s biggest shareholder, has also been pushing the lender to make changes to enhance shareholder value

Banking & finance

Chad Brayin Birmingham, England

Published: 8:58pm, 5 May 2023

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HSBC shareholders on Friday rejected a proposal by frustrated minority investors to increase the bank’s dividend payouts and radically change its structure in a major affirmation of the lender’s strategy under chief executive Noel Quinn.

The critical shareholder vote followed a year-long campaign by Ping An Insurance Group, the bank’s biggest shareholder, to shake up the lender and ongoing frustration by some of its Hong Kong retail investors over the cancellation of its dividend three years ago at the request of HSBC’s chief regulator in Britain.

The minority investors, led by Ken Lui Yu-kin, the leader of the “Spin Off HSBC Asia Concern Group”, had called for the bank to consider a significant shake-up to drive shareholder value, including spinning off its business in Asia. They also sought to return the bank’s annual dividend to pre-pandemic payout levels of 51 US cents a share.

“Being global is how we generate a significant portion of our revenues and is central to our whole strategy,” HSBC chairman Mark Tucker said in a speech on Friday before the vote tally was announced. “A restructuring or spin-off would mean that we lose this revenue as our bank would no longer have the connectivity which our customers value.

“It would not be in shareholders’ interests to split the bank.”

05:25

HSBC’s break-up dilemma: why bank’s largest shareholder is pushing for change

One of Hong Kong’s three currency-issuing banks, HSBC generates the bulk of its pre-tax profit from its Asian business.

After the vote, Tucker said support for the board of directors’ positions on the resolutions would have been more than 90 per cent without a “protest vote” by Ping An. He said no major shareholders, other than Ping An, supported the minority shareholder position.

About 80 per cent of investors voted against the minority proposals.

The meeting took place in Birmingham, England, which is home to the head office of HSBC’s UK ring-fenced bank, and is about a two-hour drive from its global headquarters in London.

Outside The Eastside Rooms conference centre, climate protesters engaged in chants and a drum circle, while former employees of Midland Bank blew whistles as they protested about long-running issues related to the bank’s pension plan.

A suited man dressed as a banker set off a green flare and stepped into a bathtub in front of the building, where other protestors washed him to represent “greenwashing”.

Campaigners protest in front of HSBC’s annual meeting at The Eastside Rooms in Birmingham, England. Photo: Chad Bray

During the meeting, several climate activists interrupted speeches by Tucker and HSBC CEO Noel Quin multiple times with statements and singing. More than half a dozen were escorted from the room.

“How can you justify the way you’re behaving?,” one man shouted. “Our grandchildren will curse us for it. It is a disgrace.”

The meeting came after HSBC beat analysts’ expectations by reporting a pre-tax profit of US$12.9 billion in the first quarter in what Quinn said was a sign that the bank’s strategy was working.

Quinn, who took over as CEO in 2019, has been reshaping the bank, shifting capital to growth markets in Asia and selling Western businesses that do not fit its strategy.

Climate campaigners protest outside HSBC’s annual meeting at The Eastside Rooms in Birmingham, England. Photo: Chad Bray

On Tuesday, the bank said it would make a quarterly dividend payment of 10 US cents a share, the first quarterly payment since 2019.

HSBC cancelled its final dividend in 2019 and suspended its dividends in 2020 at the request of Britain’s Prudential Regulation Authority, as the regulator sought to guarantee banks based in the UK had capital on hand to support the economy during the early days of the pandemic.

The bank resumed half-year and annual dividend payouts in 2021, but those payments have lagged pre-2018 dividend levels. In February, HSBC announced it biggest annual dividend payment in four years and committed to a dividend payout ratio of 50 per cent for 2023 and 2024, excluding “material significant items”.

Campaigners protest over the difficulty of British National (Overseas) visa holders to access their pensions from the Mandatory Provident Fund outside HSBC’s annual meeting in Birmingham, England. Photo: Chad Bray

In recent weeks, Ping An has escalated a war of words with the bank as part of its unorthodox campaign over the past year to spur changes at the bank. China’s biggest insurer has also accused HSBC’s management of taking a “closed-minded approach” to recommendations to shake up the business.

Ping An, which said it supported the shareholder proposals, has called for HSBC to separately list its Asian operations in Hong Kong, with HSBC retaining a majority ownership similar to its controlling stake in Hang Seng Bank.

HSBC has pushed back, saying Ping An’s plan would result in a “material loss of value” for shareholders and “significantly dilute” its international business model that is core to the bank’s strategy.

“We respect HSBC’s shareholders’ choices,” a Ping An Asset Management spokesperson said after Friday’s meeting. “Meanwhile, we advise HSBC’s board of directors and management to listen to shareholders’ suggestions with an open mind, and improve their operation and management to increase corporate value.”