HSBC’s bosses are braced for a major public showdown this week with shareholders who want to break up Britain’s biggest bank.
It comes at a time when investors are concerned about the fate of California-based lender First Republic, the 14th largest in the US, which suffered a run on deposits after the collapse of Silicon Valley Bank (SVB).
HSBC rescued SVB’s London operation earlier this year.
The 158-year-old bank, which was set up in Hong Kong to provide finance between Europe and Asia, is under mounting pressure from Chinese insurance giant Ping An, its biggest shareholder, which wants HSBC to spin off its lucrative operations in Asia.
The HSBC board is resisting but Ping An has escalated its campaign for change in recent weeks.
Sign of the times: The bank is under mounting pressure from Chinese insurance giant Ping An, which wants HSBC to spin off its lucrative operations in Asia
Ping An, which has an 8 per cent stake in HSBC, is expected to vote in favour of two proposals to be tabled at Friday’s annual general meeting in Birmingham by a group of disgruntled Hong Kong retail investors led by Ken Lui.
Their demands for a regular review of strategy and a more generous dividend policy stop short of asking for a full-break up. However, they are widely seen as a ‘stalking horse’ to test wider investor support for dismantling the FTSE 100 bank.
Lui’s proposals have the support of Ping An but it is not clear if he – or the insurer – will attend the AGM in person. They are opposed by the HSBC board, chaired by Mark Tucker.
HSBC, whose biggest profit centre is in Hong Kong, has held more than 20 meetings with Ping An to discuss its demands. These include a separate stock market listing for HSBC Asia in Hong Kong where it would be subject to local regulation. Despite the talks the two sides seem to be as far apart as ever.
John Cronin, banking analyst at Goodbody Stockbrokers, said: ‘It certainly feels like Ping An is ramping up the hostilities and I think this is going to continue, which will increase the pressure on the HSBC board.’
Tensions rose recently when Ping An asset management chair Michael Huang said HSBC ‘should at least respect their shareholders and their concerns or views’.
Huang added: ‘We have been extremely disappointed by HSBC management’s consistent closed-minded attitude to all solutions.’
Tucker and his colleagues believe the costs and risks of spinning off its Asia business are too great. Analysts at investment bank KBW reckon a split would incur a one-off cost of up to £8.8 billion.
HSBC, whose balance sheet is bigger than the UK economy, is keen to draw a line under the row and is confident it can see off the rebels – at least for now.
It received a boost when influential shareholder advisory groups Glass Lewis and Institutional Shareholder Services urged investors to vote against the rebels’ proposals.
No other major shareholders have so far backed Ping An’s break-up plans.
HSBC is expected to post strong results this week with first quarter pre-tax profits of around £6 billion versus £3.3 billion a year ago.
Its shares are up 16 per cent in the past year and the bank is now valued at £115 billion.
