HSBC shareholders will vote on the spinoff proposal at the annual meeting

  • HSBC will hold its annual general meeting on Friday at 11am London time/6pm Hong Kong time.
  • At the center of attention for investors will be two resolutions put forward by investor Ken Lui, which calls for a spinoff of HSBC’s Asia business and a fixed dividend.
  • HSBC’s top shareholder Ping An has supported the resolution, while HSBC itself and investor advisory firms Glass Lewis and ISS advised shareholders to vote down the resolution.

Noel Quinn, CEO of HSBC Holdings Plc, right, Mark Tucker, chairman, center, and Peter Wong, vice chairman, during the bank’s shareholder meeting in Hong Kong, China, Monday, April 3, 2023. HSBC’s top executives met with its Hong Kong shareholders from pensioners to taxi drivers as the lender tries to fend off a push in Asia to break up the bank. Photographer: Paul Yeung/Bloomberg via Getty Images

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HSBC shareholders will vote on proposals at the bank’s annual meeting on Friday, including whether to spin off the Asia business.

Resolutions 17 and 18 on the agenda, presented by a group of investors led by Ken Lui, call for a “strategic review” of the company, including the spinoff proposal and fixed dividend.

Those proposals have received support from HSBC’s top shareholder Ping An Insurance, which expressed similar views to Lui in a statement.

In March, HSBC advised investors to reject the two resolutions, a stance supported by investment advisory firms ISS and Glass Lewis.

On Tuesday, HSBC reported a better-than-expected set of first-quarter results and reinstated its quarterly dividend.

Speaking to CNBC’s Emily Tan on Friday ahead of the meeting, Lui said that “some of the actions I took put pressure on management, so it delivered a better-than-expected report. I’m pleased with the results this quarter. We” will continue to monitor management’s conduct.”

However, HSBC CEO Noel Quinn has pushed back on Luis’ resolutions, previously telling CNBC on April 14 that he does not believe a fixed dividend is “wise corporate governance and wise capital management for a bank.” He said a dividend payout ratio is more balanced and “is the industry model.”

Last month, HSBC said the spin-off of its Asian business “would result in material loss of value to HSBC shareholders.”

Quinn said management is already improving the bank’s performance and is on a “very good trajectory.”

The “special resolutions” require 75% of the vote to pass, but Lui expressed confidence.

“When I submitted these resolutions, I was very confident that both will be passed because they can stimulate the share price to go up. As a shareholder of HSBC, even if you don’t support it, you shouldn’t vote against it either,” he said.

Michael Makdad, senior equity analyst at Morningstar, said he personally does not expect these resolutions to clear the 75% hurdle. But he told CNBC’s “Squawk Box Asia” that the proposals reflect a long-term problem “that is not likely to go away for HSBC.” He predicted that the bank will continue to see activists or leading shareholders put pressure on management going forward.

Makdad said much of the pressure comes 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. But as a bank, it’s not easy to simplify,” he said.

He pointed to HSBC’s efforts to sell its French retail unit as well as its Canadian operations. “If it goes through, that will be great. But all these things take time and it’s not easy.”

In light of the banking sector’s recent problems in the US and Europe, Makdad is quick to add that these do not mean that HSBC is a troubled bank.

“It’s just a bank that has some great operations [in] Hong Kong and elsewhere. It has some very profitable, very strong operations. And then it has other operations that it might not need,” he said.

Shares in HSBC in Hong Kong traded 0.6% lower on Friday.

The annual meeting is scheduled to begin at 6:00 p.m. Hong Kong time.

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