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HSBC, Europe’s biggest bank, recently defended its strategy to shareholders, addressing concerns over its business structure and performance in its largest market, Asia. Chairman Mark Tucker and CEO Noel Quinn reiterated the board’s recommendation to vote against a resolution that would force the bank to spin off or reorganize its Asian business.
Tucker emphasized that splitting the bank would not be in the shareholders’ interest and would destroy value, including dividends. He stated that the current strategy is working and moving dividends up. The bank has been facing calls to separate its Asian business from its other regions, but Quinn reassured shareholders that the group is performing well as a whole, with profits in Hong Kong and the UK no longer being dragged down by underperformance elsewhere.
Addressing concerns about revenue loss from a breakup, Quinn explained that the bank heavily relies on cross-border transactions, and such a split would result in significant revenue loss. Shareholders have also expressed dissatisfaction with the bank’s dividend cancellation in 2020. However, HSBC has brought back its dividend in 2021, albeit at a lower level.
Despite the dividend reinstatement, some shareholders, such as Christine Fong, argue that small shareholders in Hong Kong relied on the dividend for regular expenses. Fong and activist shareholder Ken Lui have called for shareholders to vote in favor of the proposal to spin off HSBC’s Asian business. Lui plans to focus on targeted outreach to institutional shareholders and canvass 18 districts of Hong Kong to gain support for the resolution.
HSBC is also facing pressure from its largest shareholder, Ping An, which holds an 8% stake in the bank. Ping An has backed calls for HSBC to rethink its structure and improve its performance and value. While the insurer has not recommended a specific path forward, it supports initiatives that could boost the bank’s stock performance or value, including a spinoff of its Asian business.
In addition to addressing concerns about the bank’s business structure, HSBC’s leaders were also asked about the recent acquisition of Silicon Valley Bank’s UK arm. Quinn and Tucker defended the acquisition, stating that it was a good business opportunity that allowed the bank to gain innovative startups as customers. They assured shareholders that due diligence had been performed despite the speed of the deal.
Tucker also commented on recent tumult in the banking industry, stating that he did not expect an immediate impact on HSBC. He acknowledged that share prices of all banks have been suppressed due to the collapse of smaller regional banks and the takeover of Credit Suisse. However, he did not believe these developments represented a systemic risk to the sector.
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