HSBC Brushes Aside Hong Kong Investor's Asia Spin-off Proposal

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 bank's 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.

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 the bank's 2022 results and "other matters of interest", the bank said in a notice to shareholders last month.

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.

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".