HSBC activist shareholder demands AGM vote on Asia business spin-off

By Selena Li and Sinead Cruise

HONG KONG/LONDON (Reuters) - HSBC's most vocal minority investors are demanding a vote at the global lender's 2023 shareholder meeting in May on whether it should devise a formal plan to boost returns by spinning off its lucrative Asian business.

Ken Lui, an individual HSBC shareholder and leader of a Hong Kong-based investor group calling for a break up of the bank, is one of at least 100 retail investors calling for such a vote, a letter sent to HSBC on Feb. 20 and reviewed by Reuters shows.

A second proposed resolution calls on HSBC to restore pre-COVID-19 dividend levels equivalent to at least 51 cents per share annually, up from the 32 cents it paid out in 2022.

"We feel it's the right thing to do by allowing all shareholders to vote on such critical issues rather than keeping it away from the voting process," Lui told Reuters.

Lui's move comes days after HSBC reported a 92% surge in quarterly profit and pledged more regular dividends and share buybacks to win favour among disgruntled investors.

The minority investors are critical of HSBC's sprawling global structure and echo calls by the bank's largest shareholder, Ping An Insurance Group Co of China, to demerge its Asian division.

Ping An in November urged HSBC to lower costs by cutting jobs and disposing of peripheral non-Asian businesses.

"The shareholders will need to demonstrate that the requisition is valid before it can be formally accepted," a spokesperson for HSBC said.

HSBC's other institutional shareholders, particularly in Britain, have so far shown little appetite for a break-up.

"We are supportive of the current structure and would prefer management to concentrate on maximising return on equity now that interests rates have moved up, rather than breaking up the group," one of the bank's 20 largest investors told Reuters.

A second large institutional investor, also based in Britain, also questioned Lui's push at this point, citing HSBC's improved returns and stronger cash distribution plans.

The UK's Companies Act stipulates a company is required to give notice of a resolution once it has received requests from at least 100 investors who have a right to vote at the AGM.

RALLYING SUPPORT

Lui, who runs an education company in Hong Kong and says he is a long-term HSBC investor, said he would "visit one by one" HSBC's top 20 shareholders, who are mostly large fund managers, to rally support.

However, the activist shareholder said he has "not engaged with Ping An at all".

Lui told Reuters that HSBC has requested both proposals to be submitted as 'special' resolutions, which he said shows the lender is "very worried" that the proposal will be passed.

According to HSBC's Articles of Association, shareholders wishing to direct the board on strategy must do so via a special resolution, in line with normal corporate practice, a source familiar with the matter told Reuters.

A resolution defined as "ordinary", would require just 50% of the vote to pass, but if deemed "special" a minimum 75% of the vote would have to be met.

A few institutional investors have shown interest in supporting the proposals, Lui said of his second such attempt to force HSBC to improve dividends, with the first ending in vain due to lack of institutional support.

Hundreds of retail investors in Hong Kong - HSBC's biggest market - were particularly upset when it scrapped its dividend in 2020 during the COVID-19 pandemic.

Lui said retail investors are still dissatisfied with payouts after HSBC resumed dividend distributions, as they are lower than pre-pandemic levels and are not issued regularly.

(Reporting by Selena Li in Hong Kong and Sinead Cruise in London; Additional reporting by Lawrence White; Editing by Alexander Smith)