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Investors force HSBC shareholder vote on structural overhaul

Hong Kong investors have forced HSBC into a shareholder vote on its structure and strategy, including a potential spin-off of its Asian arm.

An investor group, led by the minority shareholder Ken Lui, said the bank’s Asian activities were “effectively subsidising the western businesses, to the detriment of HSBC’s global shareholders” in a way that undermines efforts to increase the bank’s value and growth.

It is not the first time that this shareholder group has sought to split apart the bank’s Asian and western businesses. Lui heads a group that campaigns for the move and which took out newspaper adverts calling for such a change last year.

It followed a public intervention calling for HSBC to break off its Asian arm by the Chinese insurer Ping An, which holds a stake of more than 8% in the bank, also in 2022. However, there has been no confirmation that Ping An will back Lui’s group in its latest move.

Lui is an HSBC minority shareholder who rallied other small investors to form a campaign group in favour of spinning off its Asian businesses. He runs an education company, in Hong Kong, according to Reuters.

In the notice to shareholders ahead of its AGM on 5 May, first reported by the Sunday Times, the board recommended that investors vote against an Asian spin-off, saying it had already considered “strategic reorganisation, and restructuring of the company’s Asia businesses” in 2022.

“The board concluded that all of these structural reforms would significantly dilute the economics of our international business model upon which our strategy is based,” it said. “This would result not only in a material loss of value for shareholders but also lower dividends.”

Shareholders are also to vote on another resolution tabled by Lui, which demands that the bank return its dividends to pre-Covid levels. Asian investors grew frustrated after the bank’s 2019 dividend was cancelled on the instruction of the Bank of England’s regulatory arm, the Prudential Regulation Authority, in light of the Covid-19 pandemic.

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HSBC, which makes the bulk of its profits in Asia, reported $5.2bn in pre-tax profit for the last three months of 2022, more than double the $2.5bn it reported for the same period a year earlier.

The relatively robust performance in the final three months of 2022 means HSBC is planning its highest annual shareholder payout in four years – worth 32 cents a share.

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