- HSBC will hold its Annual General Meeting on Friday at 11am London time/6pm Hong Kong time.
- Investors are focused on two resolutions by investor Ken Lui calling for a spin-off of HSBC’s Asia operations and for fixed dividends.
- HSBC’s main shareholder, Ping An, has supported the resolution, while HSBC itself and investor advisory firms Glass Lewis and ISS have advised shareholders to vote against the resolution.
Noel Quinn, Chief Executive Officer of HSBC Holdings Plc, right, Mark Tucker, Chairman, center, and Peter Wong, Vice Chairman, during the bank’s shareholders meeting in Hong Kong, China, Monday April 3, 2023. HSBC executives confronted its Hong Kong shareholders, ranging from retirees to taxi drivers, as the lender tries to fend off a push in Asia to split the bank. Photographer: Paul Yeung/Bloomberg via Getty Images
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HSBC shareholders are set to vote on proposals, including the spin-off of the Asian business, at the bank’s annual meeting on Friday.
Agenda resolutions 17 and 18, introduced by a group of investors led by Ken Lui, call for a “strategic review” of the company, including the spinoff proposal and fixed dividends.
Those motions were backed by Ping An Insurance, HSBC’s major shareholder, who expressed views similar to Lui’s in a statement.
In March, HSBC advised investors to oppose the two resolutions, a stance backed by investor advisory firms ISS and Glass Lewis.
On Tuesday, HSBC reported better-than-expected first-quarter results and restored its quarterly dividend.
Speaking to CNBC’s Emily Tan Friday before the meeting, Lui said: “Some of the actions I took put pressure on management to provide a better than expected report. I’m pleased with the performance this quarter. will continue to monitor management’s conduct.”
However, HSBC CEO Noel Quinn has pushed back on Luis’ resolutions after previously telling CNBC on April 14 that he doesn’t believe fixed dividends are “prudent corporate governance and capital management for a bank.” He said a dividend payout ratio is more balanced and “the model of the industry.”
Last month, HSBC said the spin-off of its Asia operations “would result in a significant loss in value for HSBC shareholders”.
Quinn said management is already improving the bank’s performance and is on a “very good path”.
The “special resolutions” require 75% of the votes to pass, but Lui expressed confidence.
“When I presented these resolutions, I felt very confident that both would pass because they could boost the stock price. As a shareholder of HSBC, even if you don’t support it, you shouldn’t vote against it either,” he said.
Michael Makdad, a senior equity analyst at Morningstar, said he personally doesn’t expect those resolutions to clear the 75 percent hurdle. But he told CNBC’s Squawk Box Asia that the proposals reflect a longer-term problem “that is unlikely to go away for HSBC.” He predicted the bank would continue to see activists or senior shareholders pressuring management in the future.
Makdad said much of the pressure stems from the fact that HSBC operates in many countries around the world but derives most of its profitability from its Hong Kong and UK units.
“It would make sense to simplify the structure. However, as a bank, it is not easy to simplify them,” he said.
He pointed to HSBC’s attempts to sell its French retail unit as well as its Canadian stores. “If that goes through, that’s great. But all these things take time and it is not easy.”
Given the recent troubles in the US and European banking sectors, Makdad is quick to add that this doesn’t mean HSBC is a troubled bank.
“It’s just a bank that has some great operations [in] Hong Kong and other places. It has some very profitable, very strong operations. And then it has other surgeries that it might not need,” he said.
Shares of HSBC in Hong Kong traded 0.6% lower on Friday.
The annual meeting is scheduled to begin at 6 p.m. Hong Kong time.