HSBC seeks to placate Hong Kong investors after rejecting break-up call

[August 02, 2022]  By Selena Li and Anshuman Daga

HONG KONG/SINGAPORE (Reuters) - HSBC's bosses met retail investors in Hong Kong on Tuesday, urging them that a strategy to operate as a unified bank is better for its future than a break-up mooted by top shareholder Ping An Insurance Group Co of China.

The London-headquartered group is under pressure from Ping An to explore options including spinning off its mainstay Asia business to increase shareholder returns.

At a meeting attended by hundreds of shareholders, management of HSBC Holdings PLC were quizzed by investors on its strategy for dividends and growth.

"Our strategy which is now two and half years into execution should put the bank on the path to deliver returns in 2023 at a level we have not achieved in the last 10 years," Chairman Mark Tucker said. "This return should help drive and increase the share price and have a positive impact on the dividend."

Hong Kong is HSBC's biggest market and a key investor base for the bank. Some investors in the city have been vocal in their support of Ping An's plan.

The meeting - HSBC's first with retail shareholders in the city in three years - was held a day after HSBC rejected the break-up call as it reported forecast-beating profit and promised chunkier dividends.

It was not immediately clear if Hong Kong's retail shareholders have the heft to eventually force a vote on a break-up. Big institutional investors have so far not commented on the issue.

Ping An, which has been building a stake in HSBC since 2017, when the bank's share price was about a third higher, has not called publicly for a break-up but has said it supports all reform proposals that could help increase the long-term value of the bank. The insurer owned 8.23% of HSBC as of early February.

A Chinese national flag flies in front of HSBC headquarters in Hong Kong, China, July 28, 2020. REUTERS/Tyrone Siu

DIVIDEND ANGST

Hong Kong retail shareholders were particularly unhappy when HSBC scrapped its dividend in 2020 during the COVID-19 pandemic, following a request to lenders by the Bank of England.

"Retail shareholders would welcome any proposals that change the status quo, or boost confidence of investors in management," said shareholder Ken Lui, founder of an HSBC shareholder group.

"But why am I being vocal and support the spin-off proposal? Because I don't have confidence in management," he said.
 

Lui declined to disclose details of his HSBC shareholding and it was not immediately clear how many bank shareholders are part of his investor group that was launched on Monday in support of HSBC's break-up.

A Hong Kong politician has also urged HSBC to appoint Ping An's representatives to its board, and move its headquarters back to Hong Kong.

"We do worry if the Bank of England will order HSBC to suspend dividends again in the next wave of the pandemic," Christine Fong, a district council member in Hong Kong who will attend the meeting with HSBC, told Reuters.

"If HSBC returns to Hong Kong, it will be less affected by UK political factors and regulation."

In 2016, HSBC decided to keep its headquarters in London, rejecting the option of shifting it back to Hong Kong after a 10-month review.

(Reporting by Selena Li and Anshuman Daga; Editing by Muralikumar Anantharaman and David Holmes)

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