HSBC brushes aside Hong Kong investor's Asia spin-off proposal, fixed dividends

HSBC Holdings on Monday (Apr 3) pushed aside a proposal by an activist shareholder in Hong Kong to spin off its mainstay Asia business, reiterating the adverse impact on the Asia-focussed bank’s cost and clients.

Addressing shareholders in Hong Kong, its biggest market, HSBC Chairman Mark Tucker said the bank’s board was unanimous in recommending that shareholders vote against proposals to restructure the bank and pay fixed dividends.

The comment came as Ken Lui, an individual HSBC shareholder and leader of a Hong Kong-based investor group, called for the break-up of the bank. His second proposed resolution calls on HSBC to restore pre-Covid-19 dividend levels.

Tucker told the shareholders a restructuring or spin-off of its Asia business, as demanded by Lui, would create a major period of uncertainty for clients, and employees and shareholders would be disrupted.

“In fact, there will be significant cost over a number of years with material execution risks. So it would not be in your interest to split the bank,” Tucker told hundreds of the bank’s individual investors.

Tucker also argued it’s not prudent to fix a dividend. 

He regrets cutting out dividend payments during the height of the pandemic, calling it a highly unusual event. But he said the bank has already moved to restore quarterly payouts and is planning a special US$0.21 dividend after it completes the sale of its Canadian unit later this year.

HSBC has “substantial dividend distribution capacity,” Tucker told investors. The bank is set this year for the best returns in a decade, and while the recent banking turmoil has been unsettling there’s no systemic risk to the industry, he said. 

The meeting in Hong Kong is being held ahead of HSBC’s main annual general meeting in the British city of Birmingham on May 5, to discuss the bank’s 2022 results and “other matters of interest”, the bank said in a notice to shareholders last month.

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Lui’s proposals echo calls by HSBC’s largest shareholder, Ping An Insurance Group of China Ltd, to demerge its Asian division, which accounts for the bulk of its revenue and profit. REUTERS, BLOOMBERG