HSBC reaches out to HK investors after rejecting Ping An's break-up offer

A logo of HSBC is displayed outside a branch at the financial Central district in Hong Kong, China June 2, 2015. REUTERS/Bobby Yip

HSBC‘s bosses will meet retail investors on Tuesday in Hong Kong, the biggest market for Europe’s largest lender, seeking to convince them their strategy to operate as a global bank is vital to boosting growth.

The London-headquartered group is under pressure from its largest shareholder, Ping An Insurance Group Co of China Ltd, to explore options including spinning off its mainstay Asia business to increase shareholder returns.

The informal meeting, which will discuss earnings and strategy, comes a day after HSBC rejected the breakup call, reported forecast-beating profit and promised chunkier dividends, sending its Hong Kong-listed shares to a one-month high.

HSBC‘s response represented its most direct defence since news of Ping An’s proposal broke in April.

The lender’s shares dipped 0.2% in early trading on Tuesday ahead of the meeting, in a broader Hong Kong market that was down 3.0%.

According to HSBC, the venue of the meeting is the Kowloonbay International Trade & Exhibition Centre. The third floor, where the meeting will be held, can house more than 1,000 guests without social gathering restrictions, according to the building’s floor plan.

Ping An, which has been building a stake in HSBC since 2017, when the bank’s share price was about a third higher, has not called publicly for the breakup but has said it supports all reform proposals that could help increase the long-term value of HSBC Holdings PLC.

The insurer owned 8.23% of HSBC as of early February.

Hong Kong retail shareholders were particularly unhappy when HSBC scrapped its dividend in 2020 during the COVID-19 pandemic, following a request to lenders by the Bank of England.

“Retail shareholders would welcome any proposals that change the status quo, or boost confidence of investors in management,” said shareholder Ken Lui, founder of an HSBC shareholder group.

“But why am I being vocal and support the spin-off proposal? Because I don’t have confidence in management,” he said.

A Hong Kong politician has also urged HSBC to appoint Ping An’s representatives to its board, and move headquarters back to Hong Kong.

“We do worry if the Bank of England will order HSBC to suspend dividends again in the next wave of the pandemic,” Christine Fong, a district council member in Hong Kong who will attend the meeting with HSBC, told Reuters.

“If HSBC returns to Hong Kong, it will be less affected by UK political factors and regulation.”

In 2016, HSBC decided to keep its headquarters in London, rejecting the option of shifting it back to its main profit-generating hub of Hong Kong after a 10-month review.

HSBC Chief Executive Noel Quinn told reporters on Monday the bank is unlikely to appoint a Ping An executive to its board due to a conflict of interest.

“There is the potential for conflict of interest given there is an overlap in their business model with ours in terms of insurance and banking,” Quinn said.

Reuters

Bring stories like this into your inbox every day.

Sign up for our newsletter - The Daily Brief
Subscribe to Newsletter

You have 3 free stories remaining for the month. Register to continue reading our content