HSBC shareholders voted against a proposal backed by its biggest investor Ping An to split the sprawling global lender, in a victory for chairman Mark Tucker at the bank’s annual meeting on Friday.
Two special resolutions calling on the bank to regularly review the unbundling and listing of its Asian operations and to restart a guaranteed dividend were rejected, with only around 20% of shareholders voting in favor of each proposal. The protest votes came from Ping An and a group of disgruntled Hong Kong retail shareholders.
Tucker, CEO Noel Quinn and all the other directors were re-elected for another year, despite 20% of shareholders voting against.
On the eve of the event, HSBC was drawn into an increasingly vitriolic situation war of words with Ping An owning about 8% of the shares. Over the past year, the Chinese insurer has pushed for a spin-off of HSBC’s more profitable Asian operations, which it said would boost its below-average market valuation. He also says the bank can no longer navigate difficult US-China geopolitics after repeatedly being caught between the two sides.
HSBC extension he countered that an east-west split would be too costly, risky, and difficult to get regulatory approval.
Tucker said the findings “draw a line” in the strategic debate and noted that no other institutional shareholder supported Ping An’s campaign. She added that less than half of the investors voted at the meeting, which doubled the voting power of Ping An’s 8% stake.
Earlier in 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.”
“Going global is how we generate a significant portion of our revenue and is central to our entire strategy,” Tucker said in a speech in the British city of Birmingham. “A restructuring or spin-off would mean we lose this revenue as our bank would no longer have connectivity.
“Our customers, 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 HSBC has “exaggerated” the “costs and risks” and is not engaging seriously with its owners’ legitimate concerns, despite 20 meetings between the two sides, including with Ping An President Peter Ma.
The insurer dismissed a strong first-quarter performance as flattered by one-time earnings and interest rate hikes, which “do nothing to detract from deep fundamental concerns about strategy and performance.”
Tucker said this argument “demonstrates a fundamental misunderstanding of HSBC’s business model” and that the last decade of ultra-low interest rates was an aberration and as central bank policy normalised, the bank was prepared to make much higher profits.
The two special resolutions of the AGM were introduced by a group of retail investors led by Ken Lui.
Uno demands a guaranteed dividend of 51 cents each year – the level set by HSBC from 2015 to 2019 – until banned from payouts by UK regulators during the pandemic, which infuriated Ping An and thousands of small Hong Kong shareholders who rely on them for income.
“In the past, the dividend was 51 cents a share every year, regardless of how much profit we made,” Chief Executive Officer Noel Quinn said in response. “In some years, we were distributing 70, 80 or even 90 percent of our profits in dividends, which meant we couldn’t invest enough in our business to modernize and grow it.”
The other resolution called for a quarterly review of its group structure, including “demerger, strategic reorganization and restructuring of its Asia operations”.
Ping An’s campaign has so far failed to garner the support of 20 other institutional investors. Chief Executive Officers Glass Lewis and ISS both told shareholders to vote against the resolutions and Norway’s sovereign wealth fund, the fourth-largest owner with 3%, said it would vote against them this week.
However, the Chinese insurer is showing little sign of ending its campaign.
Similar to Wednesday’s Barclays AGM, the meeting was repeatedly disrupted by climate activists. A group sang to the tune of YMCA extension, “HSBC, take your money from HSBC. . . they are selling greenwashing lies. . . investors complicit up to their eyes”.
Others dressed in shower caps staged a “greenwashing” protest in which they purged themselves of the impact of HSBC’s coal funding, with a ditty to the tune of A message for you Rudyby the ska band The Specials.
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