Rebel HSBC shareholders in Hong Kong won reinforcements on Wednesday from Hong Kong's largest labour union who called on the government to safeguard the interests of local investors.
The ranks of angry shareholders demanding that HSBC revoke its decision to scrap dividend payments are swelling. They need to recruit 5 per cent of the shareholder base to call for an extraordinary general meeting.
One group, which calls itself the HSBC Shareholders Alliance, had collected over 5,000 shareholders as of Wednesday, almost 3 per cent of HSBC's shareholder base, according to a spokeswoman.
The rebellion erupted after HSBC and Standard Chartered suspended dividends and share buy-backs on April 1 at the request of the Prudential Regulation Authority (PRA), an arm of the Bank of England and their chief regulator. The PRA threatened to use its statutory powers if the UK's biggest banks, including HSBC, did not comply.
Representatives of Hong Kong Federation of Trade Unions, the largest labour group in Hong Kong with 420,000 members, gave a letter to Financial Secretary Paul Chan Mo-po urging him to intervene on behalf of investors.
"We have received a large number of complaints from our members, including workers and retirees," said Michael Luk Chung-hung, a lawmaker who represents the union.
From retirees to large pension funds, cutting the cash dividend has been particularly harsh for Hong Kong investors, who have come to rely on it as a steady source of income. About a third of the bank's shareholders in Hong Kong are retail investors and its shares are a common gift for graduates and newlyweds.
The rebels want HSBC to pay the final dividend in stock, rather than cash, and eliminate pay for the bank's top executives for a year, as well as add a director representing shareholders on its board. The HSBC Shareholders Alliance has said it is studying ways to protect the rights of shareholders, including taking legal action.
HSBC investors protest at HSBC's Hong Kong headquarters on April 8. Photo: Dickson Lee alt=HSBC investors protest at HSBC's Hong Kong headquarters on April 8. Photo: Dickson Lee
Luk said Hongkongers stand to lose about HK$10 billion (US$1.3 billion) from the cancellation of the fourth-quarter dividend alone.
"I trusted HSBC as it is the largest bank in Hong Kong. I have my payroll account and saving account at the bank. It is all about trust but now the bank betray us," said a union member who gave her surname as Lai. The 76-year widow and retiree owns 10,000 shares of HSBC.
HSBC's dividend yield at 5.8 per cent is much higher than the average saving rate at banks which that is close to zero or time deposit at about 2 per cent.
HSBC shares dropped 0.6 per cent on Wednesday to close at HK$39.9, or 9.6 per cent below HK$44.15 at their close on March 31, the day before the dividend announcement.
"We believe the abrupt cancellation of dividends severely tarnishes the trust in Hong Kong's banking industry," said Thomas Pang Cheung-wai, chairman of another group of disgruntled shareholders with about 100 members.
At a Legislative Council meeting on Monday, the Secretary for Financial Services and the Treasury James Lau acknowledged that many investors in pensions and retirement funds, as well as institutional investors, had been affected by the UK regulators' move, noting Hong Kong authorities "have been in close touch with overseas counterparts".
The dividend cancellation also renewed calls by investors for HSBC to move its headquarters back to Hong Kong, where it was founded 155 years ago. Hong Kong is the lender's biggest market, but it has been domiciled in the UK since 1993. The bank opted to keep its headquarters in London after a review four years ago.
A HSBC spokeswoman on Wednesday referred to a letter from Noel Quinn, the HSBC chief executive, last Friday saying the bank regrets the loss for investors.
Even if the rebel shareholder manage to convene an EGM will still be an uphill battle to table a vote and win it said Stephen Chan, a partner at law firm Dechert.
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