HSBC spinoff: Bank’s top executives face stressed shareholders in Hong Kong demanding breakup

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HSBC’s top executives defended their strategy on Monday to frustrated shareholders in the lender’s biggest market, as Europe’s biggest bank continued to face calls for a split.

At an informal shareholder meeting in Hong Kong, Chairman Mark Tucker and CEO Noel Quinn fielded questions from investors on the bank’s outlook and other issues. Demands radical changes in your business For the purchase of the UK branch of Silicon Valley Bank.

In prepared remarks, Tucker and Quinn reiterated the board’s recommendation that shareholders vote against a proposal on the docket for its annual general meeting in May that would have left the bank with a plan to spin off or reorganize its Asian business — the lender’s Will force you to come. Main source of profit.

Tucker said the board was unanimous in its opposition to the proposal and stated clearly: “It would not be in your best interests to break up the bank.”

He said the board had previously reviewed several options for restructuring the bank, and had concluded that such options would “really destroy value for shareholders”, including dividends.

“Our strategy is working,” Tucker told the room of more than 1,000 shareholders. “Our current strategy is to keep the dividend moving up.”

HSBC has been facing demands since last year to separate its Asian business from the rest of the bank.

Shareholders in Hong Kong – where HSBC is a mainstay of many retail investors’ portfolios – argue that the London-based lender’s performance has declined. Business in other areas.

Quinn addressed those complaints directly on Monday, saying, “Our profits in Hong Kong and the UK are no longer being eroded by poor performance elsewhere. The group is performing well overall.”

Later pressed on the issue by a shareholder, Quinn said that breaking up the bank would result in “significant revenue loss” as much of its business depended on cross-border transactions.

Investors are also unhappy with HSBC eliminating its dividend in 2020 at the request of British regulators. They argue that if the lender locks down its activities in Asia, it will not have to expose Hong Kong shareholders to requests in other jurisdictions.

Christine Fong, a district council member in Hong Kong, said she represented about 500 small shareholders who were affected by the dividend cancellation.

“Street hawkers, taxi drivers or teachers – they all depended on dividends to pay their regular expenses like mortgages, insurance payments, school fees,” Fong told CNN.

“That’s why, three years ago, what HSBC did upset those small minority shareholders.”

Fong has now joined calls for shareholders to vote in favor of the proposal to spin off the bank’s Asian business, even though the lender will bring back its dividend in 2021, albeit at a lower level.

A branch of HSBC Bank in Hong Kong last July.  HSBC is a mainstay of many retail investors' portfolios in the city, which is also its top market.

Ken Lui, an activist shareholder in Hong Kong who put together the proposal, doubled down on his call for support ahead of Monday’s meeting.

The motion will need 75% of votes to pass in May, but “nothing is impossible,” he told reporters outside the meeting venue.

Lui, who said he personally has a stake worth 100 million Hong Kong dollars ($12.7 million), called for his team to focus on “targeted outreach to institutional shareholders to present our case and garner their support.” Planned.

His group will also campaign in 18 districts of Hong Kong to “let HSBC shareholders know that they finally have the chance to speak for themselves and defend their rights through voting,” he said.

HSBC is also facing pressure from its largest shareholder.

ping n

China’s biggest insurer, which owns an 8% stake in HSBC, has backed calls for the bank to rethink its structure.

in a series of Comment “We will support any initiative, including spinoffs, that is conducive to improving HSBC’s performance and value,” said Huang Yong, chairman of the asset management arm of Ping An, which was taken public by the Chinese firm last November.

The insurance giant’s views have not changed since then, according to a person familiar with the matter.

Ping An is calling on HSBC to explore a restructuring aimed at boosting its valuation and simplifying its regulatory obligations around the world, the source told CNN.

The insurer did not recommend any specific path forward but would support any initiative, including the spinoff of its Asian business, that could boost its stock performance or value, the person said. Ping An did not immediately respond to a request for comment about how it plans to vote at the upcoming general meeting.

HSBC leaders on Monday were also asked why the bank took over SVB’s British unit following the surprise collapse of its parent company in the United States. The purchase was made last month for £1 ($1.20), just days after SVB closed down.

Critics have questioned HSBC’s ability to conduct adequate due diligence on SVB UK clients because the deal was completed so quickly.

“Did HSBC look at SVB’s clients in detail? Say, financial statements – can they pay back the loan? Fong said.

Quinn and Tucker defended the acquisition as a good business opportunity, helping the bank gain hundreds of innovative startups as customers. He rejected the notion that management did not have time to conduct due diligence.

Tucker also took aim at the recent turmoil in the banking industry, saying he did not expect an “immediate impact” on HSBC.

“Following the collapse of many small regional banks and the takeover by Credit Suisse, share prices of all banks have declined,” he said.

But he said he did not believe such developments represented a “systemic risk” for the sector. “I expect a period of uncertainty” before the panic subsides, he said.

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