HSBC Holdings dismissed an activist shareholder's proposal on Monday to spin off its core Asian business, reiterating the negative impact such a move would have on the Asia-centric bank's expenses and clients. HSBC Chairman Mark Tucker addressed an informal gathering of shareholders in Hong Kong, the bank's largest market, stating that the board unanimously recommended that shareholders vote against the restructuring and fixed dividend proposals.
Ken Lui, an individual HSBC shareholder and leader of a Hong Kong-based investor group, advocated for the bank's breakup and a return to pre-COVID-19 dividend levels. Tucker informed shareholders that the proposed restructuring or spin-off of the Asian business would create a prolonged period of uncertainty for clients, causing disruptions for employees and shareholders. Tucker said, "In fact, there will be significant cost over a number of years with material execution risks. So it would not be in your interest to split the bank."
Supporters of the breakup campaign welcomed approximately 1,100 attendees at an exhibition center in Hong Kong's Kowloon Bay district with banners reading, "spin off HSBC Asia now." The Hong Kong meeting precedes HSBC's main annual general meeting in Birmingham, UK, on May 5th, where the bank's 2022 results and "other matters of interest" will be discussed.
Lui's proposals, up for vote in May, mirror Ping An Asset Management's (601318.SS) calls for the demerger of HSBC's Asian unit, which generates the majority of the bank's revenue and profit. HSBC has recently resisted Ping An's proposal, arguing that the move would be expensive, while reporting profits exceeding expectations and promising larger dividends.
Regarding Lui's demand for increased dividends, HSBC CEO Noel Quinn told Hong Kong shareholders that the London-based bank intends to return payouts to pre-COVID levels as soon as feasible. However, he noted that a fixed dividend is "not financially sensible or workable."
Lui, who remains "very confident" that the proposals will pass at the AGM, is working with proxy engagement advisers to engage with institutional shareholders and plans to rally support across Hong Kong's 18 local districts.
