HSBC’s shareholders voted against a proposal backed by its biggest investor Ping An to split up the sprawling global lender, in a victory for chair Mark Tucker at the bank’s annual meeting on Friday.
Two special resolutions demanding that the bank regularly reviews separating and listing its Asia operations and restarts a guaranteed dividend were defeated, with only about 20 per cent of shareholders voting in favour of each proposal. The protest votes came from Ping An and a group of disgruntled Hong Kong retail shareholders.
Tucker, chief executive Noel Quinn and all other directors were re-elected for another year, despite 20 per cent of shareholders voting against them.
In the run-up to the event, HSBC was drawn into an increasingly vitriolic war of words with Ping An, which owns about 8 per cent of the stock. For the past year, the Chinese insurer has been pressing for a spin-off of HSBC’s more profitable Asian operations, which it argued would boost its sub-par market valuation. It also says the bank can no longer navigate fraught US-China geopolitics after being repeatedly caught between the two sides.
HSBC countered that an east-west split would be too costly, risky and difficult to secure regulatory approval for.
Tucker said that the results “draw a line” under the strategic debate and noted that no other institutional shareholders backed Ping An’s campaign. He added that under half of investors cast votes at the meeting, which doubled the voting power of Ping An’s 8 per cent stake.
Earlier at the meeting, Tucker and the board reiterated their opposition to the activist’s demands, saying their proposals would “materially destroy value” and “put dividends at risk”.
“Being global is how we generate a significant portion of our revenues and is central to our whole strategy,” Tucker said in a speech in the UK city of Birmingham. “A restructuring or spin-off would mean that we lose this revenue as our bank would no longer have the connectivity.
“Our clients, employees and shareholders would all be negatively impacted and distracted and there would also be significant costs over a number of years as well as execution risks,” he added.
Ping An has previously said that HSBC has “exaggerated” the “costs and risks” and is not seriously engaging with the legitimate concerns of its owners, despite 20 meetings between the two sides, including with Ping An chair Peter Ma.
The insurer dismissed a good first-quarter performance as flattered by one-off gains and interest rate rises, which “do nothing to detract from fundamental deep concerns about strategy and performance”.
Tucker said this argument “demonstrates a fundamental misunderstanding of the HSBC business model” and that the past decade of ultra-low interest rates were an aberration and as central bank policy normalised the bank was poised to make much higher profits.
The two special AGM resolutions were introduced by a group of retail investors led by Ken Lui.
One demands a guaranteed 51 cents dividend every year — the level set by HSBC from 2015 until 2019 — until it was banned from payouts by UK regulators during the pandemic, which infuriated Ping An and thousands of small Hong Kong shareholders that rely on them for income.
“In the past, the dividend was 51 cents per share every year, irrespective of how much profit we made,” chief executive Noel Quinn said in response. “In some years, we were distributing 70, 80 or even 90 per cent of our profits in dividends — which meant we could not invest enough in our business to modernise it and grow it.”
The other resolution called for a quarterly review of its group structure, including “spinning off, strategic reorganisation and restructuring of its Asia businesses”.
Ping An’s campaign has thus far failed to garner support from other top-20 institutional investors. Both major proxy advisers Glass Lewis and ISS told shareholders to vote against the resolutions and Norway’s sovereign wealth fund, the fourth-largest owner with 3 per cent, said it would vote against them this week.
However, the Chinese insurer shows little signs of ending its campaign.
Similarly to the Barclays AGM on Wednesday, the meeting was repeatedly interrupted by climate activists. One group sang to the tune of YMCA, “H-S-B-C, get your money out of H-S-B-C . . . they’re selling greenwashing lies . . . investors complicit up to their eyes”.
Others dressed in shower caps staged a “greenwashing” protest where they scrubbed themselves down from the impact of HSBC’s coal financing, with a ditty to the tune of A Message to You Rudy, by ska band The Specials.