HSBC’s board has urged shareholders to vote against a proposed break-up of its business at its annual meeting, arguing that a split would result in a “material loss” and lower dividends.
In response to calls for the split from its largest shareholder, the Chinese insurer Ping An, HSBC warned on Wednesday that spinning off its more profitable Asian business from the rest of the bank would also require approval from regulators in approximately 25 jurisdictions, and force it to make changes to customer services.
The London-headquartered bank also said the move would risk “a multi-year period of uncertainty when clients and employees in particular would be distracted and impacted”.
The proposals regarding a potential split – which were first put forward by an investor group led by Ken Lui, a minority shareholder – will be voted on at the annual general meeting in Birmingham on 5 May.
HSBC said its shareholders could end the debate at the meeting, which will take place more than a year after Ping An first called for the split following anger over the level of shareholder returns and the Bank of England’s decision to cancel dividends during the pandemic.
The bank said the AGM offered an opportunity to discuss and vote on the matter, “and bring this issue to a conclusion”.
The lender argued that rejecting the break-up proposals would allow executives to continue their efforts to boost HSBC’s fortunes and increase payouts for investors.
It said: “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.”
HSBC also hit out at claims by Ping An that the bank had been “closed-minded” about a split, and “refused to verbally engage in discussions on the proposals, and only simply shared with us their review conclusions”.
The bank said it had held “extensive and senior-level engagement with Ping An in 2022 and 2023”, including approximately 20 meetings for which it deployed the HSBC chair, Mark Tucker, its chief executive, Noel Quinn, its chief financial officer, Georges Elhedery, and other senior managers.
It also pushed back against the chair of the insurer, Michael Huang, who said earlier this week that HSBC gave “little to no acknowledgment of any benefits” regarding a split.
The lender said it had assessed the options for HSBC’s Asia-Pacific business “with an open mind and with the benefit of robust third-party financial, legal and accounting analysis and advice”.
The bank said it had assessed Ping An’s proposal to publicly list HSBC’s Asia-Pacific business on the stock exchange during the first quarter of this year, but concluded the move would affect services for customers and reduce returns for investors.
