Yahoo Finance HSBC to be told it must break up bank in meeting with Hong Kong investors
The boss of HSBC will be urged to carve the bank in two when he meets retail investors in Hong Kong for the first time in three years as China increasingly asserts control over the business.
Noel Quinn, chief executive, and chairman Mark Tucker are to hold an informal meeting with shareholders on Tuesday, following the publication of HSBC’s half-year results.
It will be the first time since April 2019 that executives have met with Asian retail investors, who own around one third of HSBC’s shares.
Bosses previously clashed with Hong Kong investors over the decision to cancel the dividend in 2020, while many also remain unhappy about poor share price performance.
At the same time, HSBC is battling calls from top shareholder Ping An, the Chinese insurance giant, to spin off the Asian part of the bank into a separate entity – a move many in Hong Kong would support.
Simon Yuen, founder of Surich Asset Management, which represents a number of HSBC retail shareholders, said next week’s meeting was likely to be “quite difficult” for Mr Quinn and Mr Tucker.
He added that many shareholders in Hong Kong support proposals to split off the bank’s more profitable Asian operations.
This was partly because of increasing monetary policy divergence between Western and Asian countries, but also because it may boost the share performance of each part of the bank.
By setting up an Asian-only business, HSBC could also focus on growing its wealth management business as more Chinese family offices emerge, Mr Yuen added.
He said: “We agree that splitting the bank into two geographical businesses, one focusing on Western countries and the other on China or Asia Pacific territories, would be more beneficial for the bank.
“This plan would be more viable and more sustainable for the bank growing in the years to come.”
The bank will host the meeting at the Kowloonbay International Trade & Exhibition Centre, a venue with capacity of accommodating up to 3,600 people.
Mr Yuen said: “Relatively speaking within the industry, HSBC is still underperforming and so not very many of the minority shareholders are making a profit – most are asking how much they will lose.
“So the sentiment is quite negative at the moment and I’m quite pessimistic about the meeting.
“I don’t think it will make much of a difference to the share price. But perhaps if they can put some confidence into shareholders, it could end up being a turning point.”
HSBC faced a revolt among Hong Kong shareholders two years ago after bosses cancelled the lender’s dividend, following pressure from the Bank of England.
The payouts are relied upon by many shareholders based on the island for income, prompting many to band together into an “alliance” and demand it be reinstated.
Last year the dividend was restored.
Meanwhile, although a review concluded in 2016 that the headquarters should remain in London, the question of whether the bank should relocate to Asia has continued to simmer as it remains the bank’s most profitable region. HSBC was founded in Hong Kong in 1865 as the Hongkong and Shanghai Banking Corporation.
Geopolitical tensions between the West and China have also forced HSBC to make controversial choices, with the bank heavily criticised for its support of draconian security laws imposed by Beijing in Hong Kong.
More recently, the lender also became the first foreign bank in China to set up a Communist Party committee in its investment banking arm, as it moves ever closer to the mainland.
