HSBC poised for confrontation with Chinese investors: bosses in major AGM confrontation over bank’s future as largest shareholder wants to break up
- HSBC was established in Hong Kong to provide financing between Europe and Asia
- Ping An wants HSBC to spin off its lucrative Asian business
- The HSBC board is resisting, but Ping An has escalated her campaign for change
HSBC bosses are bracing for a major public showdown this week with shareholders seeking to break up Britain’s largest bank.
It comes as investors are concerned about the fate of California-based lender First Republic, the 14th largest in the US, which suffered a run on deposits following the collapse of Silicon Valley Bank (SVB).
HSBC bailed out SVB’s London operation earlier this year.
The 158-year-old bank, which was founded in Hong Kong to provide financing between Europe and Asia, is facing growing pressure from Chinese insurance giant Ping An, its largest shareholder, who wants HSBC to spin off its lucrative Asian business.
The HSBC board is resisting, but Ping An has escalated the campaign for change in recent weeks.
Sign of the times: The bank is under increasing pressure from Chinese insurance giant Ping An, which wants HSBC to spin off its lucrative business in Asia
Ping An, which holds an 8 percent stake in HSBC, is expected to vote in favor of two proposals to be tabled at Friday’s annual general meeting in Birmingham by a group of disgruntled Hong Kong retail investors led by Ken Lui.
Their demands for regular strategy review and a more generous dividend policy don’t call for a complete break. However, they are widely seen as a stalking horse to test broader investor support for the dismantling of the FTSE 100 bank.
Lui’s proposals have Ping An’s backing, but it’s not clear whether he – or the insurer – will attend the AGM in person. They are opposed by the HSBC board, chaired by Mark Tucker.
HSBC, whose largest profit center is in Hong Kong, has held more than 20 meetings with Ping An to discuss her demands. These include a separate listing for HSBC Asia in Hong Kong, where it would be subject to local regulation. Despite the talks, the two sides appear to be as far apart as ever.
John Cronin, banking analyst at Goodbody Stockbrokers, said: “It certainly feels like Ping An is stepping up hostilities and I think this will continue, adding to the pressure on the HSBC board.”
Tensions rose recently when Michael Huang, Ping An’s chairman of asset management, said that HSBC should “at least respect their shareholders and their concerns or views.”
Huang added, “We are extremely disappointed by HSBC’s management’s consistent narrow-minded attitude towards all solutions.”
Tucker and his colleagues believe the costs and risks of divesting the Asian business are too great. Analysts from investment bank KBW estimate that a split could incur one-off costs of up to £8.8bn.
HSBC, whose balance sheet is larger than the UK economy, is keen to draw a line under the line and is confident it can fend off the rebels – at least for now.
It received a boost when influential shareholder advisory groups Glass Lewis and Institutional Shareholder Services urged investors to vote against the rebels’ proposals.
No other major shareholder has so far supported Ping An’s breakup plans.
HSBC is expected to post strong results this week with a pre-tax profit in the first quarter of around £6bn compared to £3.3bn a year ago.
Shares are up 16 per cent over the past year and the bank is now valued at £115 billion.