Hong Kong
CNN
—
HSBC’s top brass defended their strategy on Monday to frustrated shareholders in the lender’s biggest market, as Europe’s biggest bank continues to face calls for its split.
At an informal shareholder meeting in Hong Kong, Chairman Mark Tucker and CEO Noel Quinn answered questions from investors on topics ranging from how the bank was approaching requests to overhaul its business to purchase of the British branch of Silicon Valley Bank.
In prepared remarks, Tucker and Quinn each reiterated the board’s recommendation that shareholders vote against a resolution on the docket for its annual general meeting in May that would require the bank to develop a plan for a spinoff or spinoff. reorganization of its Asian activities – the lender. main source of profits.
Tucker said the board was unanimous in its opposition to the resolution, clearly stating, “It would not be in your best interest to break up the bank.” »
He said the board had previously considered a range of options to restructure the bank and concluded that such alternatives would “materially destroy shareholder value”, including dividends.
“Our strategy is working,” Tucker told more than 1,000 shareholders. “Our current strategy is to increase dividends.”
HSBC has faced calls to separate its Asian operations from the rest of the bank over the past year.
Shareholders in Hong Kong – where HSBC is a mainstay of many retail investors’ portfolios – say the London-based lender’s performance has been hampered by its companies in other regions.
Quinn addressed those complaints head on on Monday, saying that “our profits in Hong Kong and the UK are no longer held back by underperformance elsewhere.” The group is performing well as a whole.
Pressed later by a shareholder on the issue, Quinn said a breakup of the bank would result in a “significant loss of revenue” because much of its business relied on cross-border transactions.
Investors were also unhappy with HSBC scrapping its dividend in 2020, at the request of UK regulators. They argue that if the lender ceased operations in Asia, it would no longer have to expose Hong Kong shareholders to claims in other jurisdictions.
Hong Kong district council member Christine Fong said she represented about 500 small shareholders affected by the dividend cancellation.
“Street vendors, taxi drivers or teachers – they all relied on dividends to pay their regular expenses, like mortgage, insurance, school fees,” Fong told CNN.
“That’s why what HSBC did three years ago upset these small minority shareholders.”
Fong has now joined calls for shareholders to vote in favor of the bank’s proposed spin-off of its Asian operations, although the lender has reduced its dividend in 2021, albeit to a lower level.
Ken Lui, a Hong Kong shareholder activist who crafted the resolution, doubled down on his call for support ahead of Monday’s meeting.
The resolution will need 75% of the vote to pass in May, but “nothing is impossible,” he told reporters outside the meeting venue.
He, who said he personally holds a stake worth HK$100 million ($12.7 million), outlined plans for his team to focus on “targeted outreach to institutional shareholders to present our case and gain their support.”
His group will also travel to 18 districts in Hong Kong “to tell HSBC shareholders that they finally have the opportunity to speak for themselves and protect their rights by voting,” he added.
HSBC is also facing pressure from its main shareholder.
Ping An (PNGAY), China’s largest insurer, owns an 8% stake in HSBC and has backed calls for the bank to rethink its structure.
In a series of remarks made public by the Chinese company last November, Huang Yong, president of Ping An’s asset management arm, said: “We will support any initiative, including a split, conducive to improving performance and value of HSBC”.
Since then, the insurance giant’s opinion has not changed, according to a source close to the matter.
The source told CNN that Ping An had asked HSBC to consider a reorganization, with a view to increasing its valuation and simplifying its regulatory obligations around the world.
The insurer has not recommended a specific path forward but will support any initiative, including a spin-off of its Asian business, that could improve the performance or value of its shares, the source added. Ping An did not immediately respond to a request for comment on how it plans to vote at the upcoming general meeting.
HSBC executives were also asked why the bank had bought the British subsidiary of SVB after the resounding collapse of its parent company in the United States. The purchase was made for £1 ($1.20) last month, just days after SVB closed.
Critics have questioned HSBC’s ability to carry out adequate due diligence on SVB UK’s customers due to the speed with which the deal was concluded.
“Has HSBC studied SVB’s customers in detail? Say, the financial statement – if they can repay the loan? » said Fong.
Quinn and Tucker defended the acquisition, calling it a good business opportunity that allowed the bank to gain hundreds of innovative startups as clients. They rejected the idea that management did not have time to conduct proper due diligence.
Tucker also commented on the recent turmoil in the banking sector, saying he did not expect an “immediate impact” on HSBC.
“After the collapse of a number of small regional banks and the takeover of Credit Suisse, the share prices of all banks were suppressed,” he noted.
But he said he did not believe such developments posed “a systemic risk” to the sector. “I expect a period of uncertainty” before nerves settle, he added.
Cnn
