HSBC and its largest shareholder Ping An clash over Asian business
HSBC is Europe's biggest bank, headquartered in London, UK. But it also has a lucrative Asian division.
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The backstory: HSBC is Europe's biggest bank, headquartered in London, UK. But it also has a lucrative Asian division, with a major presence established in Hong Kong when the city was still a British colony.
Ping An, a Chinese insurer and HSBC's largest shareholder (at just over 8%), is one investor pushing for the bank to spin off its Asia business – its main money maker. According to Ping An, doing this will make the bank more competitive and help add another US$25-35 billion to its market value. But not everyone's on the same page; two big shareholder advisory groups, ISS and Glass Lewis, have told HSBC investors to say no to Ping An's idea. This proposal is on the agenda for the company's annual shareholder meeting on May 5.
More recently: HSBC top execs informally met with shareholders in Hong Kong earlier this month to discuss several things, including the company's acquisition of Silicon Valley Bank's UK unit. During the meeting, they advised voting against the spin-off proposal, saying it would "materially destroy value for shareholders." Ping An's obviously not happy about the pushback from HSBC and said the company has "refused to verbally engage in discussions on the proposals."
The development: Another shareholder, Ken Lui, officially proposed two resolutions to be voted on in May – one, to restructure the Asian division and, second, to boost dividends back to pre-COVID levels. Lui leads the "Spin Off HSBC Asia Concern Group," and he said he's hired Alliance Advisors, a firm that focuses on shareholder engagement, to help lobby HSBC investors to vote in favor of the resolutions. Lui also said he met with execs at Ping An to discuss the ideas, and they indicated their support. The resolutions will require 75% of votes in favor, but "nothing is impossible," Lui told reporters.
Key comments:
“Up to now, HSBC has not engaged in any deep discussions with Ping An regarding the new strategic restructuring proposal,” said Michael Huang, the CEO of Ping An Asset Management. “In accordance with the fundamental principles of global corporate governance principles, HSBC should at least respect their shareholders and their concerns or views.”
“Separation is not consistent with HSBC’s business model,” HSBC said last week. “HSBC is not a portfolio of discrete domestic banks. It is an integrated bank.”
“It is our judgment, supported by third-party financial and legal advice, and with third-party assurance, that alternative structural options will not deliver increased value for shareholders. Rather, they would have a material negative impact on value,” said a spokesperson for HSBC in a statement. “We remain clear that our current strategy is the fastest, safest and most value-enhancing way to deliver returns.”
“In our view, the board’s strategy and plans appear valid and are likely to result in greater returns and value, on a risk- and cost-adjusted basis, than the overly prescriptive and, in our opinion, unnecessary proposals submitted by the proponent,” said shareholder adviser Glass, Lewis & Co in a report.
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