Shareholders demand a breakup as HSBC’s top executives face intense pressure
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HSBC’s top brass recently defended their strategy at a shareholder meeting in Hong Kong. Chairman Mark Tucker and CEO Noel Quinn addressed investors’ concerns about the lender’s business overhaul and the acquisition of Silicon Valley Bank’s UK arm.
In their remarks, Tucker and Quinn emphasized the board’s recommendation to vote against a resolution that would spin off or reorganize the bank’s Asian business. They stated that splitting the bank would not be in the shareholders’ best interest and reviewed various restructuring options that would destroy value, including dividends.
Tucker assured shareholders that the current strategy is working and moving dividends up. HSBC has faced demands to separate its Asian business, with shareholders in Hong Kong arguing that the bank’s performance has been dragged down by other regions. However, Quinn addressed these complaints by stating that the profits in Hong Kong and the UK are no longer being affected by underperformance elsewhere, and the group is performing well as a whole.
Quinn further explained that a breakup of the bank would result in significant revenue loss due to its reliance on cross-border transactions. He acknowledged the unhappiness with the dividend cancellation in 2020 but argued that cordoning off activities in Asia would protect Hong Kong shareholders from requests in other jurisdictions.
Despite the bank bringing back its dividend in 2021, some shareholders, including Hong Kong district council member Christine Fong, continue to support the proposal to spin off the Asian business. Fong highlighted how small minority shareholders relied on dividends for regular expenses and now advocate for a chance to protect their rights through voting.
Activist shareholder Ken Lui, who initiated the resolution, expressed determination in gaining support ahead of the May meeting. His group plans to focus on targeted outreach to institutional shareholders and educate HSBC shareholders about the voting process.
In addition to shareholder pressure, HSBC’s largest shareholder, Ping An, has backed calls for the bank to reconsider its structure. The Chinese insurer believes a reorganization, potentially including a spinoff of the Asian business, could enhance HSBC’s performance and value.
Amidst these challenges, HSBC’s leaders defended the recent acquisition of SVB UK. Tucker and Quinn emphasized that the deal was a good business opportunity and allowed the bank to onboard numerous innovative startups as customers. They assured shareholders that due diligence was carried out, despite the quick timeframe.
Tucker also addressed the recent tumult in the banking industry but expressed confidence in HSBC’s ability to withstand any immediate impact. While smaller regional banks have collapsed and Credit Suisse has undergone a takeover, Tucker believed that these developments did not pose a systemic risk to the sector, though a period of uncertainty could be expected.
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