A day after rejecting a pull-back plan by its top investor, HSBC officials on Tuesday reaffirmed the lender’s business strategy of operating as a global bank and pledged higher returns to irate personal stakeholders in Hong Kong.
Ping An Insurance (Group) Co of China (601318.SS), a lender with its headquarters in London, is pressuring the company to examine options, such as spinning off its core Asia business, in order to boost shareholder returns.
In the business district meeting, which was observed by hundreds of shareholders, investors quizzed CEO Noel Quinn & HSBC Chairman Mark Tucker for further than 60 minutes about the bank’s approach to payouts and expansion.
According to activist shareholder Jay Chong, who is in his thirties and whose family owns more than 500,000 shares in HSBC, starting to pay quarterly dividends in 2023 is too late, and the quantum of payment that has been pledged is too low.
The largest market for HSBC and a significant source of investors for the Asian-focused bank in Hong Kong. City investors have been outspoken in their approval of Ping An’s strategy.
Before the meeting started on Tuesday, about 30 HSBC retail buyers demonstrated outside the conference room entrance, yelling “the administration should resign” in protest of dividend cancellations and slow returns.
Just after dismissing the break-up proposal, HSBC met with shareholders and announced profits that were above expectations, increased the profitability target, and pledged to pay out larger dividends.
A spinoff, according to the bank, would be expensive, time-consuming, and need billions in technological expenditures in addition to increasing regulatory concerns.
By the words of Tucker, the bank should be on track to provide gains in 2023 at a pace not seen in the last ten years thanks to this approach, which has been in place for two and a half years. Additionally, he stated that this recovery should support and boost the share price as well as positively affect the dividend.
Retail investors are unclear to have the clout to eventually demand a debate on a breakup, according to analysts. When contacted for a statement, large institutional investors chose not to comment on the matter.
Per Ian Gordon, a banking researcher at Investec based in London, the break-up debate is seen to be dead in the water due to the lack of interest among UK institutional players in an expensive restructuring.
The most likely scenario, according to Gordon, is that HSBC would retain the group basically intact while continuing to balance amongst China and the West.
Retail shareholders applauded as HSBC management was urged to contemplate providing special dividends and moving to Hong Kong during the event in Hong Kong.
Ping An has been increasing its holdings in HSBC since 2017, the landmark-significant time when the bank’s stock price was approximately a third higher, but it hasn’t publicly asked for a breakup. By early February, the insurance had 8.23% of HSBC under its ownership.
A Ping An official said that the demands made by several of HSBC’s minor and moderate shareholders have been taken into consideration. He added that they would support any idea that would help HSBC perform better operationally and increase shareholder value.
When HSBC eliminated its payout in 2020 during the pandemic as a result of a request made to lending institutions by the Bank of England, Hong Kong market investors were especially dissatisfied.
Meanwhile, in contrast to the flat baseline FTSE 100 index (.FTSE) and following a 7 percent spike the day before as a result of the bank’s better-than-forecasted results, HSBC shares were down 1.2 percent in London on Tuesday.