HSBC Aims To Placate Hong Kong Investors After Rejecting Break-up Call From Ping An

HSBC's bosses will meet retail investors in Hong Kong on Tuesday, seeking to convince them that a strategy to operate as a unified bank is better for its future than a break-up mooted by top shareholder Ping An Insurance Group Co of China.

The London-headquartered group is under pressure from Ping An to explore options including spinning off its mainstay Asia business to increase shareholder returns.

Hong Kong is HSBC's biggest market and represents a key investor base for the bank. Some investors in the city have been vocal in their support of Ping An's plan, making it important for Europe's largest lender to explain its position.

The informal meeting, HSBC's first such in the city in three years, will discuss the bank's earnings and strategy.

It comes a day after dual-listed HSBC rejected the break-up call, reported forecast-beating profit and promised chunkier dividends, in its most direct defence since news of Ping An's proposal broke in April.

HSBC shares soared in London and Hong Kong on Monday. Ahead of the shareholder meeting on Tuesday, the Hong Kong shares fell 1.7%, in a broader market that was down 2.3%.

According to HSBC, the venue of the meeting is the Kowloonbay International Trade & Exhibition Centre. The third floor, where the meeting will be held, can house more than 1,000 guests without social gathering restrictions, according to the building's floor plan.

It was not immediately clear, though, if Hong Kong's retail shareholders have the heft to eventually force a vote on a proposal to break-up HSBC. Big institutional investors have so far not commented on the saga.

Ping An, which has been building a stake in HSBC since 2017, when the bank's share price was about a third higher, has not called publicly for the break-up but has said it supports all reform proposals that could help increase the long-term value of HSBC Holdings PLC.

The insurer owned 8.23% of HSBC as of early February.

DIVIDEND ANGST

Hong Kong retail shareholders were particularly unhappy when HSBC scrapped its dividend in 2020 during the COVID-19 pandemic, following a request to lenders by the Bank of England.

"Retail shareholders would welcome any proposals that change the status quo, or boost confidence of investors in management," said shareholder Ken Lui, founder of an HSBC shareholder group.

"But why am I being vocal and support the spin-off proposal? Because I don't have confidence in management," he said.

Lui declined to disclose details of his HSBC holdings, and it was not immediately clear how many bank shareholders are part of his investor group that was launched on Monday in support of HSBC's break-up.

A Hong Kong politician has also urged HSBC to appoint Ping An's representatives to its board, and move its headquarters back to Hong Kong.

"We do worry if the Bank of England will order HSBC to suspend dividends again in the next wave of the pandemic," Christine Fong, a district council member in Hong Kong who will attend the meeting with HSBC, told Reuters.

"If HSBC returns to Hong Kong, it will be less affected by UK political factors and regulation."

In 2016, HSBC decided to keep its headquarters in London, rejecting the option of shifting it back to Hong Kong after a 10-month review.

HSBC Chief Executive Noel Quinn told reporters on Monday the bank is unlikely to appoint a Ping An executive to its board due to a conflict of interest.

"There is the potential for conflict of interest given there is an overlap in their business model with ours in terms of insurance and banking," Quinn said.