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HSBC looking at ‘alternative structures’ as break-up pressure grows

·3 min read
Mark Tucker, chairman of HSBC Holdings Plc, left, and Noel Quinn, chief executive officer of HSBC - Paul Yeung/Bloomberg
Mark Tucker, chairman of HSBC Holdings Plc, left, and Noel Quinn, chief executive officer of HSBC - Paul Yeung/Bloomberg

HSBC has confirmed it is modelling a potential break-up of the bank at a fractious meeting with investors in Hong Kong.

Chairman Mark Tucker told 1,000 retail investors gathered at Hong Kong’s Kowloon international trade centre on Tuesday that the board was examining “alternative structures”, without giving details. It comes amid growing pressure from the bank's biggest shareholder to carve out its Asian operations.

Management has repeatedly knocked back the calls and Mr Tucker on Tuesday again repeated his argument that a divided bank would be weaker.

“We continue to believe that our current strategy and structure will deliver very good returns over the next few years,” he said.

Mr Tucker, chief executive Noel Quinn and Peter Wong, chair of HSBC’s Hong Kong operations, met with Asian investors for the first time since 2019 on Tuesday amid pressure from Chinese insurer Ping An, HSBC’s biggest shareholder, to split the bank in two.

Some retail shareholders support the call and a group presented HSBC management with an open letter at the meeting.

“The bank’s performance in recent years was severely dragged down by the businesses in Europe and America,” the letter from the group called ‘Spin Off HSBC Asia Concern Group’ said.

“Since 2021, the Asian business has contributed almost 70pc of the bank’s profits. Instead of benefiting the shareholders, the profits generated in Asia were allocated to subsidise the loss suffered in Europe and America.”

HSBC shareholders Hong Kong - Tyrone Siu/Reuters
HSBC shareholders Hong Kong - Tyrone Siu/Reuters

The activist group is led by Ken Lui, an investor who led a previous effort to get HSBC to reinstate its dividend in 2020. The group held a small protest outside the venue and hired a truck to drive around Hong Kong with its message on the side.

In a statement, a spokesman for Ping An said: “We note the demands expressed by a number of HSBC’s small and medium-sized shareholders. We support any proposal that is conducive to improving HSBC’s operating performance and enhances shareholder value.”

Local shareholders in Hong Kong make up a third of HSBC’s investor base. They have been left angry by HSBC’s decision to follow the Bank of England guidance and cancel its dividend during the pandemic. Before the pandemic, HSBC paid a regular dividend of 51 cents.

Many retail investors rely on the bank’s dividend for retirement or to supplement their income. Dozens of elderly shareholders, some in wheelchairs and carrying walking sticks, were refused entry to the main event on Tuesday, with HSBC blaming Covid restrictions.

“I apologise sincerely for the impact that cancelling the dividend had on you and your families, I know it was a significant disappointment and how much stress and pain it caused,” Mr Tucker said at the meeting.

A new interim dividend of 9 cents was announced by HSBC on Monday. The bank plans to reinstate quarterly dividends next year and pledged to restore payouts to pre-pandemic levels “as soon as possible”.

Senior executives have called on Hong Kong shareholders to get behind HSBC’s new business plan, which has refocused its investment in Asia, while still remaining a connective node to trade with the West.

Mr Tucker said: “Our belief has been that the best strategy is to continue with the positive momentum we currently have and not risk a major structural change.

“An international financial centre needs international financial institutions to help flows of revenue into and out of Hong Kong. I think it would negatively impact the ability of Hong Kong to remain a vibrant dynamic international financial centre [if the demerger were to go ahead].”

HSBC has rebutted demands for the bank to give Ping An a seat on its board of directors. Mr Quinn on Monday said it would be a “conflict of interest”. No other major shareholders have come out in favour of Ping An’s proposals.