Hong Kong
CNN
–
HSBC’s top brass defended Monday frustrated shareholders in the lender’s biggest market, as Europe’s biggest bank continued to face calls to break up.
In an informal shareholder meeting in Hong Kong, Chairman Mark Tucker and CEO Noel Quinn from investors on issues from how the bank came is asking for an overhaul of its business to buy its UK arm in Silicon Valley.
In prepared remarks, Tucker and Quinn each reiterated the board’s recommendation that shareholders vote against a resolution on the docket for its annual general meeting in May that would force the bank to come up with a plan to spin off or reorganize its Asian business — the lender’s main source of profits.
Tucker said the board was unanimous in its opposition to the resolution, stating simply: “It is not interested in dividing the bank.”
He said that the board had previously reviewed various options for the arrangement of the bank, and concluded that such alternatives “materially waste value for shareholders.
“Our strategy is working,” Tucker told the crowd of more than 1,000 shareholders. “Our current strategy is shifting to segmentation.”
HSBC faced calls to separate its Asia business from the rest of the bank last year.
Shareholders in Hong Kong – where HSBC is one of the main portfolios of joint investors – have argued that the performance of the London-based lender has been hit by this businesses in other regions.
Quinn addressed the complaints head-on on Monday, saying that “our profits in Hong Kong and the UK are no longer focused on underperformance elsewhere.”
Pressed later by a shareholder on the issue, Quinn said a breakup of the bank would result in “significant loss of revenue” because most of its cross-border transactions.
Investors were also unhappy with HSBC’s scrapping of the 2020 dividend, at the request of British regulators. They pray that if the lender closes its activities in Asia, there will be no need to expose Hong Kong shareholders to demand in other jurisdictions.
Christine Fong, a member of Hong Kong’s district council, said she represents about 500 small shareholders affected by the dividend cancellation.
“Street hawkers, taxi drivers or teachers – they all rely on the dividend to pay for their regular expenses, like mortgage payments, insurance payments,” Fong told CNN.
“So, three years ago, what HSBC was rejected by the small minority shareholders.”
Fong has now joined calls for shareholders to vote in favor of the proposal for the bank to spin the Asian dividend in 2021, even at a lower level.
Ken Lui, a shareholder activist in Hong Kong who co-sponsored the resolution, doubled down on his call for support on Monday.
The resolution will need 75% of votes to pass in May, but “nothing is impossible,” he told reporters outside the meeting venue.
Lui, who said that he personally held a stake worth 100 million Hong Kong Dollars ($ 12.7 million targeted by institutional exputionals in our case and get their support).
His group will also be absconding in 18 districts in Hong Kong “to tell HSBC shareholders that they finally have the chance to speak for themselves and protect their rights by voting,” he added.
HSBC is also facing pressure from its largest shareholder.
Ping a
(Phineas)China’s largest insurer, holds an 8% stake in HSBC and is backing calls for the bank to change its structure.
In a series of arrived made public by the China Firm in November, Huang Yong, Chairman of Ping Asset Management Armament, said that “We will support any initiatives that have a conguctive with the ability of HSBC.”
Since then, the insurance giant’s views have not changed, according to a person familiar with the matter.
The source told CNN that Ping called for HSBC to explore the reorganization of the organization to increase the valuation and simplify the regulatory obligations around the world.
The insurer did not recommend a specific path forward but would support any initiatives, including a spinoff of its business in Asia, that could increase its stock or value. Ping did not immediately respond to a request for comment on how it plans to vote at the upcoming general meeting.
HSBC leaders were also asked if the bank had targeted SVB’s British unit following the dramatic collapse of its parent in the United States. The purchase was made for £1 ($1.20) last month, just days after SVB folded.
Critics have questioned HSBC’s ability to do enough due diligence on SVB UK customers because of how quickly the deal came together.
“Does HSBC look at SVB’s detail clients? Saying, the financial statement – if they can repay the loan?” said Fong.
Quinn and Tucker defended the acquisition, calling it a good business opportunity that allowed the bank to get hundreds of new startups as customers. They return the idea that management does not have time to perform due diligence.
Tucker also weighed in on the current turmoil in the banking industry, saying he doesn’t expect an “immediate impact” on HSBC.
“After the collapse of a number of small banks in the region and the takeover of credit suisse, the prices of all the banks were suppressed,” he said.
But he said he did not believe such developments represented “a systemic risk” to the sector. “I expect a period of uncertainty” before nerves settle, he added.