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HSBC, the world’s 8th largest bank, won the shareholder battle against the spin-off of its Asian business on Friday. The HSBC restructuring plan had the backing of Ping An, the most valuable insurer in China.
The Chinese insurance group, along with a few top Chinese stakeholders in HSBC, also called for higher dividend distributions by the company. However, during the bank’s annual general meeting on May 5, they fell short of obtaining the necessary 75% of votes from all shareholders to approve both proposals.
At the bank’s headquarters in England’s Birmingham, shareholders cast votes on resolutions 17 and 18, which were tabled by a group of investors led by activist shareholder Ken Lui. Lui claims to own HSBC shares to the tune of $12.7 mn.
Resolution 17 was aimed at restructuring the bank, while resolution 18 was geared towards providing investors with more dividend payments. Around 80% of the votes cast were against these resolutions, while slightly more than 19% voted in favour. All in all, total votes made up 50% of all HSBC shareholders, in line with turnouts witnessed in prior years, as per HSBC.
“I’m delighted that the large majority of HSBC’s shareholders have voted overwhelmingly to support the bank’s strategy and draw a line under the debate on the structure of the bank,” said HSBC Chairman Mark Tucker on Friday.
“The Board, HSBC colleagues and our shareholders can now move forward with the shared objective of focusing on our customers, driving stronger performance, and creating more value for our investors,” he added.
HSBC restructuring boosting returns?
After the conclusion of HSBC’s annual shareholder’s meeting, Lui told reporters that the two resolutions (17 and 18), even though they weren’t passed, were responsible for pushing the bank’s management to perform better.
He was referring to the fact that the banking giant witnessed a rise in profit in the first three months of 2023. The company recorded a $12.9 bn profit before tax, up from $4.14 bn last year. While profit attributable to shareholders grew to $10.33 bn from $2.76 bn in 2022.
Along with that, the revenue of the company increased by 64% year on year to $20.2 bn. HSBC’s net interest income increased from $6.48 bn last year to $8.96 bn this year. Also, the company’s net interest margin improved by 50 basis points to 1.69%.
Also Ping An made it clear that it was keen on the HSBC restructuring proposal and wanted the bank to separate its Asian business. The Chinese insurance group, which owns an 8.2% stake in HSBC, said last month: “In recent years, numerous shareholders have repeatedly suggested that HSBC management should spin off HSBC’s Asian business…We believe that such a proposal which grants the Asia business more autonomy merits serious consideration following years of underperformance and underinvestment.”
HSBC, on the other hand, said that restructuring plans would disrupt the bank’s distinctive worldwide customer service model and cause a considerable erosion of earnings, returns, dividends, and shareholder value.
“Other investors and analysts are unconvinced the Chinese insurer’s push to carve out HSBC’s Asian business would boost returns, given the potential costs and distractions involved. The plan would also call into question HSBC’s unique status as a global lender with significant footholds both east and west — a major selling point for large companies and high net worth individuals,” said S&P Global.
