HSBC Executives Face Tense Shareholders Demanding a Breakup

Hong Kong - Ekhbary News Agency

HSBC Executives Face Tense Shareholders Demanding a Breakup

HSBC's top brass mounted a defense of their strategy on Monday to a room of frustrated shareholders in the lender’s largest market, as Europe’s biggest bank continues to grapple with calls for a structural split. Chairman Mark Tucker and CEO Noel Quinn faced pointed questions from investors, addressing concerns ranging from the bank's response to demands for a business overhaul to its recent acquisition of Silicon Valley Bank’s UK arm.

In prepared remarks at an informal shareholder meeting in Hong Kong, Tucker and Quinn reiterated the board’s firm recommendation that shareholders vote against a resolution slated for the bank's annual general meeting in May. This resolution seeks to compel HSBC to devise a plan for spinning off or reorganizing its Asian operations, which represent the primary engine of the bank's profitability. The board's unanimous opposition was clearly articulated by Tucker, who stated, "It would not be in your interest to split the bank." He elaborated that the board had thoroughly reviewed various restructuring options and concluded that such alternatives would "materially destroy value for shareholders," including a detrimental impact on dividends.

"Our strategy is working," Tucker asserted to the more than 1,000 shareholders present. "Our current strategy is moving dividends up." This comes as HSBC has been under pressure for the past year to disentangle its Asian business from the rest of its global operations. Shareholders in Hong Kong, a critical market where HSBC is a cornerstone of many retail investors' portfolios, argue that the London-headquartered bank's overall performance is being hampered by its operations in other regions. Quinn directly addressed these grievances, stating, "our profits in Hong Kong and the UK are no longer being dragged down by underperformance elsewhere. The group is performing well as a whole."

When pressed further by a shareholder on the potential consequences of a breakup, Quinn cautioned that it would lead to "significant revenue loss" due to the bank's reliance on cross-border transactions. Investor dissatisfaction has also been fueled by HSBC's decision to scrap its dividend in 2020, a move prompted by British regulators. Critics contend that if the bank were to isolate its Asian activities, it could shield Hong Kong shareholders from the impact of regulatory demands in other jurisdictions. Christine Fong, a district council member in Hong Kong, representing approximately 500 small shareholders affected by the dividend cancellation, highlighted the personal impact: "Street hawkers, taxi drivers or teachers — they all relied on the dividend to pay for their regular expenses, like mortgage, insurance payments, school fees." She added, "That’s why, three years ago, what HSBC did upset those small minority shareholders." Fong has now joined the chorus advocating for a vote in favor of spinning off the Asian business, even though HSBC reinstated dividends in 2021, albeit at a reduced level.

Ken Lui, an activist shareholder in Hong Kong who spearheaded the resolution, reinforced his call for support ahead of the meeting. While the resolution requires a 75% majority to pass in May, Lui expressed optimism to reporters outside the venue, stating, "nothing is impossible." Lui, who disclosed holding a personal stake valued at HK$100 million (approximately $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 also intends to campaign across 18 districts in Hong Kong to "tell HSBC shareholders that they finally have a chance to speak for themselves and protect their rights through voting."

Adding to the pressure is HSBC's largest shareholder, Ping An (PNGAY), China's leading insurer, which holds an 8% stake. Ping An has publicly supported calls for HSBC to reconsider its structure. In November, Huang Yong, chairman of Ping An’s asset management arm, stated, "we will support any initiatives including a spinoff that are conducive to improve HSBC’s performance and value." This stance has reportedly remained consistent, according to a source familiar with the matter. The source indicated to CNN that Ping An has been advocating for HSBC to explore reorganization options aimed at boosting valuation and simplifying its global regulatory obligations. While the insurer has not dictated a specific course of action, it affirms support for any initiatives, including an Asian business spinoff, that could enhance stock performance or value. Ping An did not immediately respond to requests for comment regarding its voting intentions at the upcoming meeting.

HSBC leaders also addressed the controversial acquisition of the UK unit of Silicon Valley Bank (SVB) following its parent company's abrupt collapse in the United States. The deal, valued at £1 ($1.20), was completed just days after SVB's failure. Critics have questioned HSBC's due diligence capabilities, citing the rapid nature of the transaction. Fong posed a critical question: "Did HSBC look into the clients of SVB in detail? Say, the financial statement — whether they can pay back the loan?" Quinn and Tucker defended the acquisition, characterizing it as a strategic opportunity to onboard hundreds of innovative startups as clients. They refuted claims that management lacked sufficient time for thorough due diligence.

Tucker also commented on the broader banking sector turmoil, including the collapse of several smaller regional banks and the acquisition of Credit Suisse. He noted that while these events have suppressed bank share prices, he does not anticipate an "immediate impact" on HSBC. He concluded by stating that these developments do not represent a "systemic risk" to the sector, though he does expect "a period of uncertainty" before market stability returns.

Hong Kong - Ekhbary News Agency