HSBC Holdings Plc Chairman Mark Tucker held discussions with key shareholders in recent weeks as the Asia-focused lender pushes back against repeated calls from its biggest investor Ping An Insurance Co. to restructure.
(Bloomberg) — HSBC Holdings Plc Chairman Mark Tucker held discussions with key shareholders in recent weeks as the Asia-focused lender pushes back against repeated calls from its biggest investor Ping An Insurance Co. to restructure.
Investors including Norway’s sovereign wealth fund have pledged to back HSBC at Friday’s meeting in Birmingham, England. Another of the bank’s top shareholders is concerned about how any split of HSBC would affect operations such as US dollar clearing and its currencies business, according to a person familiar with the matter.
HSBC is one of the Federal Reserve’s primary dealers, meaning it can trade directly with the central bank. It’s also been the sole settlement institution for dollar clearing in Hong Kong since 2000. HSBC’s major shareholders including Blackrock Inc. and State Street Corp. also declined to comment.
Tucker seemed calm about the upcoming annual general meeting with shareholders on Friday, May 5, the person said, asking not to be named talking about private discussions. A spokesperson for HSBC, which reported earnings Tuesday that beat analyst expectations, declined to comment on details of its meetings with shareholders.
“We have said all along that we believed the fastest and safest way to get increased valuation, increased profit, increased dividends, is by focusing on the current strategy,” HSBC Chief Executive Officer Noel Quinn said on Bloomberg Television Tuesday. “These results show that the strategy is working.”
Ping An disagrees.
“HSBC’s improved first quarter results, which were flattered by multiple one-off positive items and interest rate rises, do nothing to detract from Ping An Asset Management’s fundamental deep concerns about HSBC’s strategy and underlying performance,” a spokesperson said in a statement. “It is necessary for HSBC to push for structural reform to fundamentally address HSBC’s underlying market competitiveness issues, improve performance, enhance value and accelerate growth opportunities in Asia.”
Asia Pivot
The AGM is the latest flashpoint in a year of fighting between HSBC and Ping An, which owns about 8% of the bank and wants it to split off the Asian operations that generate most of its earnings. HSBC has pledged a pivot to Asia while trimming its presence in Europe and North America.
Some other institutional investors including the State Board of Administration of Florida and California Public Employees’ Retirement System have pledged to back HSBC at this week’s meeting in Birmingham, England.
Ping An is likely to back two resolutions, proposed by a group of other shareholders, that would force the bank to provide regular updates on the structure of its Asian business and restore its dividend to its pre-Covid level. Meanwhile, Institutional Shareholder Services and Glass, Lewis & Co., which provide independent voting advice to shareholders, have said HSBC investors should vote against those proposals.
“At a time with weakness in global bank earnings, it seems at odds to push HSBC, a stronger performing bank to spin off its Asian businesses and hamstring them to increase an already competitive dividend,” said Mark Williams, senior finance lecturer at Boston University. “The bank’s stock performance also indicates solid performance and not a bank that needs radical surgery.”
HSBC has experience in seeing off investors seeking change. In 2007, activist firm Knight Vinke Asset Management unsuccessfully pushed to spin off the Asia business. And the bank itself has examined relocating its headquarters to Hong Kong before deciding the regulatory hurdles were too onerous.
HSBC’s dealings with Chinese shareholders such as Ping An are complex, given the mounting tensions between one of the word’s largest economies and the West over issues such as Taiwan. In March, Chinese President Xi Jinping criticized the US for what he called a strategy of “containment and suppression” — led by trade restrictions, blacklists and investment curbs — that has challenged China’s technological development.
There’s also the question of the cost of breaking up HSBC, which the bank has said would destroy shareholder value — a stance that Ping An has characterized as “closed-minded.”
“As highlighted by HSBC, a spinoff increases execution risk and uncertainty as it requires regulatory approval in 25 jurisdictions,” JPMorgan Chase & Co. analysts wrote in a recent note. “We do expect front-loading of execution costs and potential revenue loss due to dis-synergies, particularly in the Global Banking and Market business.”
–With assistance from Denise Wee and Zhang Dingmin.
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