Shareholders of HSBC demand a breakup, intensifying pressure on top executives
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In recent news, HSBC’s top management defended their strategy at an investor meeting in Hong Kong. Chairman Mark Tucker and CEO Noel Quinn addressed concerns from shareholders about the bank’s business overhaul and its acquisition of Silicon Valley Bank’s UK arm.
Tucker and Quinn reiterated the board’s recommendation to vote against a resolution to spin off or reorganize the bank’s Asian business. The board unanimously opposed this resolution, stating that it would not be in the shareholders’ interest to split the bank. They explained that alternative restructuring options would significantly destroy value for shareholders, including dividends.
“Our strategy is working,” Tucker assured the shareholders. “Our current strategy is moving dividends up.” HSBC’s Asian business has been the main source of profits for the bank, and there have been calls to separate it from the rest of the bank. However, Quinn addressed these concerns and said that the profits in Hong Kong and the UK are no longer being dragged down by underperformance elsewhere, and that the bank is performing well as a whole.
Quinn further explained that a breakup of the bank would result in significant revenue loss due to the reliance on cross-border transactions. Moreover, some investors have also expressed dissatisfaction with HSBC’s dividend cancellation in 2020. They argue that separating the bank’s activities in Asia would protect shareholders in Hong Kong from requests in other jurisdictions.
Despite the bank reinstating its dividend in 2021, there are still calls for the spinoff of the Asian business. Activist shareholder Ken Lui, who put forth the resolution, is rallying support ahead of the upcoming general meeting in May. While the resolution requires 75% of votes to be passed, Lui believes that nothing is impossible and plans to reach out to institutional shareholders and canvass different districts of Hong Kong to gain support.
HSBC is also under pressure from its largest shareholder, Ping An, China’s biggest insurer, which holds an 8% stake in the bank. Ping An has supported calls for a reorganization of HSBC to improve its performance and value. The insurer has not recommended a specific path forward but will support any initiatives, including a spinoff of the Asian business, that could enhance stock performance or value.
During the meeting, HSBC’s leaders were also questioned about the recent acquisition of SVB UK. Chairman Tucker and CEO Quinn defended the acquisition, stating that it was a good business opportunity. They assured shareholders that proper due diligence had been carried out, despite the deal coming together quickly after SVB’s collapse.
In conclusion, HSBC’s top management firmly believes that their current strategy is working and that splitting the bank would not be beneficial for shareholders. They recognize the concerns raised by investors but assert that the bank’s performance is strong and that a breakup would result in significant revenue loss. As an awesome software development company, we understand the importance of effective strategy and believe that HSBC’s position is well-justified in this case.