HSBC hits back at top shareholder’s sharpest call to split bank

LONDON – HSBC has hit back at the latest proposal by its largest shareholder, Ping An, to restructure the bank and separate its Asia business as a Hong Kong-listed entity, saying that this will result in a material loss of value for shareholders.

Europe’s largest bank said in a statement published on Wednesday that it had had extensive meetings with Ping An, including around 20 meetings at a senior level, but there remained disagreement.

HSBC said the structural reforms suggested by Ping An would undermine the bank’s international business model and erode earnings, dividends and shareholder value.

“HSBC is a global systemically important bank. It is not in the interests of its shareholders, customers or stakeholders for HSBC’s structure to remain the subject of prolonged debate,” the statement added. HSBC said it had evaluated Ping An’s proposals “with an open mind”, in an apparent reference to the Chinese insurer’s claims in its own statement on Tuesday that the lender had refused to listen to its ideas.

Shareholders will vote at the bank’s annual meeting on May 5 on two resolutions, filed by a Hong Kong investor and supported by Ping An, calling for higher dividends and a regular update on strategic proposals such as the spin-off plan.

HSBC said investors should vote against both resolutions.

Shareholder advisory firm Glass Lewis has also recommended that stock investors vote against the two resolutions.

“In our view, the board’s strategy and plans appear valid and are likely to result in greater returns and value, on a risk- and cost-adjusted basis, than the overly prescriptive and, in our opinion, unnecessary proposals submitted by the proponent,” Glass Lewis said in a report. 

Ping An publicly called for the creation of “a separately listed Asia business headquartered in Hong Kong”, in a statement on Tuesday.

The more than 2,000-word statement offers the most detailed insight yet into Ping An’s stance on HSBC and underlines the increasingly fractious relationship between Europe’s largest bank and one of its most important investors.

The latest sally comes about a year after the Chinese insurer was first publicly identified as behind a campaign to push the London-headquartered lender to consider a break-up of its business. 

Ping An said in the statement it remained “deeply concerned” about HSBC’s performance, noting that its results of late had been largely buoyed by rising interest rates and were subpar when compared with similar banks.

Mr Michael Huang, chairman of Ping An Asset Management, said that while Ping An was heartened by improvements in HSBC’s recent results and exits from operations, including retail banking in Canada and the United States, the firm remained “deeply concerned about HSBC on five fronts”.

These include its ability to continue to improve performance after interest rates peak, an excessive cost base and too much focus on non-Asia businesses. 

Mr Huang also said that HSBC was misrepresenting the potential costs of the Ping An proposals.

“This prejudice was highlighted in HSBC’s 2022 interim results presentation where management listed 14 reasons why a break-up would destroy material value,” Mr Huang said in the statement. “Not only did management refuse to countenance any benefits, but it also, in our view, exaggerated many of the costs and risks.” REUTERS, BLOOMBERG