Hong Kong
CNN
—
As Europe's largest bank continues to face calls to split, HSBC's top executives defended their strategy on Monday to disappoint shareholders in the lender's biggest market.
At an informal shareholder meeting in Hong Kong, Chairman Mark Tucker and CEO Noel Quinn took questions from investors on a range of issues, from how the bank was approaching calls to reorganize its business to the acquisition of Silicon Valley Bank's UK arm.
In prepared remarks, Tucker and Quinn each reiterated the board's recommendation that shareholders vote against a resolution at its annual general meeting in May that would force the bank to plan to spin off or reorganize its Asian operations. Main source of revenue.
Tucker said the board unanimously voted against the resolution, making it clear that “splitting the bank would not be in your interest.”
He said the board had previously considered various options for restructuring the bank and concluded that those alternatives would “substantially destroy shareholder value,” including dividends.
“Our strategy is working,” Tucker told a gathering of more than 1,000 shareholders. “Our current strategy is to increase our dividend.”
HSBC has been facing calls over the past year to separate its Asian operations from the rest of the bank.
Shareholders in Hong Kong, where HSBC is central to many retail investors' portfolios, claim the London-based lender's performance has fallen because of: Business in other regions.
Quinn addressed these complaints head-on on Monday, saying: “Our profits in Hong Kong and the UK are no longer undermined by poor performance elsewhere. “The entire group is performing well,” he said.
Quinn, later pressured by shareholders on the issue, said a split would result in a “significant loss of revenue” for the bank because much of its business relies on cross-border transactions.
Investors are also unhappy with HSBC scrapping its 2020 dividend at the request of UK regulators. They argue that if lenders block their activities in Asia, they would no longer have to expose Hong Kong shareholders to requests from other jurisdictions.
Hong Kong District Council member Christine Fong said she represented about 500 minority shareholders affected by the dividend cancellation.
“Street hawkers, taxi drivers, teachers, etc. all relied on dividends to pay regular expenses such as mortgages, insurance premiums, and school fees,” Fong told CNN.
“This is why HSBC upset its minority shareholders three years ago.”
Fong joined the lender in calling on shareholders to vote in favor of the bank's proposal to spin off its Asian operations, despite the lender bringing back dividends in 2021, albeit at a lower level.
Ken Lui, an activist shareholder from Hong Kong who authored the resolution, sought support ahead of Monday's meeting.
The resolution would need a 75% vote in May, but he told reporters outside the conference room: “Nothing is impossible.”
Louis, who said he personally holds a stake worth HK$100 million ($12.7 million), planned for his team to focus on “targeted outreach activities to present our case to institutional shareholders and win their support.” .
His group will also survey 18 districts in Hong Kong to “let HSBC shareholders know that they finally have the opportunity to speak for themselves and protect their rights through voting,” he added.
HSBC is also under pressure from its largest shareholder.
Ping An, China's largest insurer, owns an 8% stake in HSBC and has backed calls for HSBC to rethink its structure.
“We will support all plans, including spin-offs, that will help improve HSBC’s performance and value,” said Huang Yong, chairman of Ping An Asset Management, in a series of remarks released by the Chinese company in November last year.
The insurance giant's views have remained unchanged since then, according to a person familiar with the matter.
Sources told CNN that Ping An has been calling for HSBC to explore a reorganization to boost its valuation and simplify its regulatory obligations globally.
The insurer did not recommend a specific future direction, but added that it would support any plan that could boost the stock's performance or value, including spinning off its Asian operations. Ping An did not immediately respond to a request for comment on its voting plans at the upcoming general meeting.
HSBC's leaders were also asked on Monday why it was taking over the UK's SVB division after the shocking collapse of its US parent. The purchase was made for £1 ($1.20) last month, just days after SVB folded.
Critics have questioned HSBC's ability to carry out proper due diligence on SVB UK customers because of how quickly the deal came together.
“Has HSBC scrutinized SVB customers? For example, tell your financial statements whether you can repay the loan.” Fong said.
Quinn and Tucker defended the acquisition, saying it was a good business opportunity for the bank to gain hundreds of innovative startups as customers. They rejected the idea that management did not have time to conduct proper due diligence.
Mr Tucker also said he did not expect an “immediate impact” on HSBC regarding the recent turmoil in the banking industry.
“After the collapse of several small regional banks and the acquisition of Credit Suisse, the stock prices of all banks fell,” he said.
But he said he did not believe such developments posed a “systemic risk” to the sector. “We expect there will be a period of uncertainty before nerves calm down,” he added.