HSBC shareholders to vote on proposed split at annual meeting

  • HSBC will hold its annual general meeting on Friday at 11 a.m. London time / 6 p.m. Hong Kong time.
  • Two resolutions tabled by investor Ken Lui, which call for a spin-off of HSBC’s Asian business and fixed dividends, will take center stage for investors.
  • HSBC’s largest shareholder, Ping An, backed the resolution, while HSBC itself and investor advisory firms Glass Lewis and ISS advised shareholders to vote against the resolution.

Noel Quinn, chief executive of HSBC Holdings Plc, right, Mark Tucker, chairman, center, and Peter Wong, vice chairman, during the bank’s shareholders’ meeting in Hong Kong, China, Monday, April 3, 2023. HSBC senior executives have faced off against its Hong Kong shareholders, from pensioners to taxi drivers, as the lender seeks to fend off a push in Asia to split up the bank. Photographer: Paul Yeung/Bloomberg via Getty Images

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HSBC shareholders are due to vote on proposals at the bank’s annual meeting on Friday, including whether to divest its Asia business.

Resolutions 17 and 18 on the agenda, filed by an investor group led by Ken Lui, call for a “strategic review” of the company, including the spin-off proposal and fixed dividends.

These motions received support from HSBC’s largest shareholder, Ping An Insurance, which expressed views similar to Lui’s in a statement.

In March, HSBC advised investors to reject both resolutions, a position backed by investor advisory firms ISS and Glass Lewis.

On Tuesday, HSBC released a better-than-expected set of first-quarter results and reinstated its quarterly dividend.

Speaking to CNBC’s Emily Tan on Friday ahead of the meeting, Lui said “some of the actions I took put pressure on management, so she delivered a better than expected report. I’m pleased with the performance of this quarter. We’ll continue to monitor the conduct of management.”

However, HSBC CEO Noel Quinn pushed back against Lui’s resolutions, previously telling CNBC on April 14 that he doesn’t believe fixed dividends are “sound corporate governance and sound management of capital for a bank”. He said a dividend payout ratio is more balanced and “is the model for the industry.”

Last month, HSBC said the spin-off of its Asian business would “result in a significant loss of value for HSBC shareholders”.

Quinn said management is already improving the bank’s performance and is on a “very good trajectory.”

“Special resolutions” require 75% of the vote to pass, but Lui expressed his confidence.

“When I submitted these resolutions, I was very confident that both will pass because they can boost the share price higher. As a shareholder of HSBC, even if you don’t support it, you don’t shouldn’t vote against it either,” he said.

Michael Makdad, senior equity analyst at Morningstar, said he personally didn’t expect these resolutions to break through the 75% hurdle. But he told CNBC’s “Squawk Box Asia” that the proposals reflect a longer-term problem “that shouldn’t go away for HSBC.” He predicted that the bank will continue to see activist or high-profile shareholders pressure management in the future.

Makdad said much of the pressure comes from the fact that HSBC operates in many countries around the world, but derives most of its profitability from its Hong Kong and UK units.

“It would make sense to simplify the structure. However, as a bank, it is not easy to simplify it,” he said.

He pointed to HSBC’s attempts to sell its French retail unit as well as its Canadian operations. “If it comes to fruition, it will be great. But all of these things take time, and it’s not easy.”

In light of recent banking sector woes in the US and Europe, Makdad is quick to add that this does not mean HSBC is a troubled bank.

“It’s just a bank that has big operations (in) Hong Kong and other places. It has very profitable and very strong operations. And then it has other operations that it may not have need,” he said.

Shares of HSBC in Hong Kong were trading down 0.6% on Friday.

The annual meeting is scheduled to start at 6 p.m. Hong Kong time.

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