HSBC Seeks To Keep Bank Intact As Shareholders Vote On Split

HSBC faced a vote by shareholders Friday over an activist proposal supported by the bank's largest stakeholder, Chinese insurer Ping An, to split the business as they seek better returns.

Asia-focused HSBC has urged shareholders to vote down the proposal at its annual general meeting in Birmingham, central England.

The vote comes at the end of a week in which the London-headquartered bank posted a surge in quarterly net profit, boosted by rising interest rates and its rescue of the UK arm of failed US lender Silicon Valley Bank.

Addressing the Birmingham meeting, which faced disruption by climate protesters, HSBC chairman Mark Tucker insisted the proposal to split the bank would not be beneficial.

"We concluded that the alternative structural options would materially destroy value for shareholders, including putting your dividends at risk. This remains our unanimous view today," he said.

But siding with minority investors, Ping An -- which owns more than eight percent of HSBC -- argues that the lender lags behind international peers and that a recent improvement in performance was tied to rising interest rates, which it claims have peaked.

The US Federal Reserve this week hinted that it would pause a policy of hiking borrowing costs aimed at cooling inflation.

The European Central Bank meanwhile on Thursday delivered a smaller interest rate increase than recently as higher borrowing costs begin to take their toll, but said it had "more ground to cover" in fighting red-hot price increases.

"It is necessary for HSBC to push for structural reform to fundamentally address HSBC's underlying market competitiveness issues," Michael Huang, chairman and CEO of Ping An Asset Management, said recently.

Ping An is calling for HSBC to engage in a "strategic restructuring" that would see it create a separately listed bank headquartered in Hong Kong.

Huang said the proposal would allow HSBC to retain control over a separate Asia business, adding that the bank's management had "exaggerated many of the costs and risks" associated with a split.

HSBC was among a number of major banks to cancel dividends early in the Covid-19 pandemic after a de facto order from the Bank of England, a move that riled some Hong Kong investors.

Some retail investors have cited the dividends cancellation as a reason to back the spin-off proposal.

Friday's shareholder meeting faced disruption from climate protesters, a common feature this year at annual general meetings being held by major UK companies.

"You are happy to profit while the world burns. HSBC stop the greenwash," one protester shouted as the meeting got underway and before security removed some demonstrators.

Environmentalists are pushing for banks to stop funding fossil fuel projects, arguing that while they continue to do, their pledges to help tackle climate change are acts of "greenwashing".