HSBC wins battle with largest shareholder over call for bank’s dissolution

HONG KONG/LONDON (CNN) HSBC has fended off an attempt by its largest shareholder to break the bank, with an “overwhelming majority” of investors voting on Friday to keep the deal intact.

The shareholders of Europe’s largest bank met on Friday for their annual general meeting in Birmingham, England. One particularly controversial proposal on the vote – backed by China’s Ping An Asset Management – would have forced the lender to develop a plan to spin off or restructure its business in Asia, which generates most of its profits.

“The overwhelming majority of shareholders, with the exception of Ping An, have voted to put an end to the debate on the structure of the bank,” an HSBC spokesman said in a statement.

About half of shareholders voted at the AGM, consistent with turnout in previous years, the spokesman noted. Ping An Asset Management, a arm of Chinese insurer Ping An (PIAIF), has an 8% stake in HSBC, according to the lender’s latest annual report.

The London-based bank is one of the world’s leading financial institutions, but Ping An has expressed deep concerns about the bank’s future and has called for its Asia operations to be spun off into a Hong Kong-listed entity.

Retail investors in Hong Kong, HSBC’s top market, have also called for a resolution, arguing that the bank’s performance has been strong in Asia but weak elsewhere, dragging down the overall score.

“It’s never been a discussion that management has had to refute as much as it is doing right now,” said Fahed Kunwar, an analyst at Redburn who has been covering HSBC for nearly 15 years, ahead of the meeting.

READ :  The “world's safest car” is the size of a motorcycle and costs $300,000

HSBC leadership unanimously rejected the resolution and had personally urged shareholders to vote against it. Executives have said such a transformation would not work because much of the bank’s business relies on cross-border transactions.

Analysts told CNN they didn’t expect the proposal, which required a high threshold of 75% of the yes vote, to go through by Friday.

HSBC shares rose 2.5% in late afternoon trading in Europe on Friday.

HSBC said the board had previously considered options to restructure the bank and concluded such alternatives would “destroy essential value”.

In recent weeks, shareholder advisory firms Glass Lewis and Institutional Shareholder Services had also advised investors to veto the proposal due to a lack of detailed rationale and potential complications in the separation of the bank’s businesses.

Also ahead of the vote, Michael Makdad, a senior equity analyst at Morningstar, said a split should not be taken lightly as it could create a tax headache and a mountain of regulatory hassles.

HSBC’s strong gains this week, which included tripling earnings, restoring dividends and announcing buybacks, also provided arguments for management that it was on the right track, analysts said.

Ping In isolated

Ken Lui, an active Hong Kong shareholder who led the resolution, told CNN he was confident his proposal would be accepted.

HSBC is a mainstay of many portfolios in the city, including those of retirees, school teachers and taxi drivers.

Ken Lui campaigned for votes in Hong Kong in April. The activist shareholder sought investor support for his HSBC restructuring proposal.

Those shareholders were unhappy that the bank scrapped its dividend in 2020 at the request of UK regulators. They had argued that by locking down the lender’s operations in Asia, the lender would no longer have to expose the region’s investors to inquiries in other jurisdictions.

READ :  No-fault auto reform advocates hopeful 'fix' will happen after election day

Ping An Asset Management privately pushed for HSBC to overhaul its structure a year ago.

It came out publicly in a strong statement last month, accusing the lender’s management of exaggerating “many of the costs and risks” of a split.

But ultimately she failed to garner the support of any of the bank’s top 50 shareholders for her position on Friday, the HSBC spokesman said.

HSBC executives speaking at the AGM were repeatedly interrupted by climate protesters in the venue. The bank is ranked 13th on a global list of fossil fuel industry donors compiled by a group of nonprofit organizations including The Rainforest Action Network and the Sierra Club.

— Olesya Dmitracova contributed to the coverage.