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HSBC shareholder group seeks vote on dividends, Asia restructuring reporting

HSBC shareholder group seeks vote on dividends, Asia restructuring reporting

The ‘Spin Off HSBC Asia Concern Group’ seeks a return of the annual dividend to pre-pandemic levels and a quarterly report on efforts to increase the value of the Asia business, including a potential spin-off.
A minority shareholder of HSBC claims he has rallied 100 fellow small investors in Hong Kong to support resolutions requiring the bank to regularly update shareholders on restructuring plans for its Asian operations and increase its dividend payouts.

Ken Lui Yu-kin, the leader of the “Spin Off HSBC Asia Concern Group”, said he has submitted two resolutions to the London-based bank and asked that shareholders be allowed to vote on them at the bank’s May 3 annual general meeting.

“Those 100 gathered shareholders have already submitted the required information in the hope that HSBC will accept the resolutions and not abuse the process, and eventually implement them correspondingly according to the voting results”, he said.

The resolutions call for HSBC to pay an annual dividend of at least 51 cents a share – its pre-pandemic level – and provide a quarterly report on its plan to increase the value of its Asian businesses, “including but not limited to spinning off, strategic reorganisation and restructuring its Asia businesses”.

It marks the latest push by shareholders of HSBC to consider separating the Asian business, which accounts for the bulk of its pre-tax profit.

Ping An Insurance Group, HSBC’s biggest shareholder, has been conducting an unorthodox campaign to pressure HSBC over the past year to spin off its Asian operations, calling in November for the bank’s management to “adopt an open attitude” to suggestions to improve its performance and arguing that a separation of the business could open substantial shareholder value.

“As with any proposed shareholder-requisitioned resolution, the shareholders will need to demonstrate that the requisition is valid before it can be formally accepted”, a HSBC spokesperson said. “We will respond at the appropriate time”.

The bank’s management has argued that it generates much of its business through its international network connecting capital between East and West and would require creating an entirely separate information technology network for the spun off business at great expense. The bank operates in 63 countries and territories worldwide.

Lui said that he has not contacted Ping An regarding the proposed shareholder resolutions, but will seek to meet with major shareholders, such as Ping An and BlackRock, when HSBC formally adds his proposals to the agenda for the annual meeting. .

Lui is a “substantial” shareholder in Legendary Group Limited, owning 8.35 per cent of the Hong Kong company, according to the company’s most recent quarterly filing in February.

ACCP Global, which collaborates on investments with Ping An Group’s investment arm Ping An Capital, acquired shares in the Hong Kong-listed company on the open market last year, according to a November 29 statement, which did not divulge the amount of shares bought or the price.

“I cannot stop Ping An from buying shares in the company [Legendary],” Lui said. “They did not inform me before buying the shares from the stock market. My proposal is not related to [Ping An’s] investment.”

Much of the shareholder frustration stems from HSBC cancelling its final dividend for 2019 and suspending its dividend in 2020 at the request of its chief regulator in Britain over concerns about the economic effects of the coronavirus pandemic. The bank also has found itself regularly caught in political firestorms in recent years between Beijing and Western governments.

HSBC resumed paying dividends in 2021 and made its biggest payout in four years with an annual dividend of 32 US cents a share for 2022.

As part of its annual results announcement in February, HSBC said it would establish a dividend payout ratio of 50 per cent for 2023 and 2024, excluding “material significant items”, and consider future share buy-backs.

Lui said the 50 per cent ratio commitment was an improvement, but the bank should guarantee the proposed minimum dividend so minority shareholders can prepare for how much they will receive.

The bank also said it would return to paying quarterly dividends in the first quarter and consider a special dividend of 21 US cents a share following the completion of the sale of its Canadian business to Royal Bank of Canada in late 2023.

The sale of the Canadian is the latest in a series of divestitures since Noel Quinn became CEO in 2019.

The lender is selling its French retail banking business to a unit of private equity giant Cerberus, agreed in July to offload its Russian operations to Expobank and exited its mass-market retail business in the US in 2021.
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