The clash between HSBC Holdings and its biggest shareholder is becoming increasingly heated ahead of a general meeting that will test investor support for a proposal to spin off the bank's lucrative Asia businesses.
Ping An Insurance Group this week publicly called for the creation of "a separately listed Asia business headquartered in Hong Kong," saying it is "necessary for HSBC to push for structural reform to fundamentally address HSBC's underlying market competitiveness issues, improve performance, enhance value and accelerate growth opportunities in Asia."
HSBC wasted no time in reiterating its opposition to the plan by China's Ping An, arguing it misunderstands the bank and would destroy shareholder value and mean lower dividends, according to a statement on Wednesday.
The struggle between HSBC and its largest shareholder over the structure of the bank spilled into the open almost a year ago. Ping An is seeking a more abrupt break off of the bank's more profitable Asian operations, while HSBC has pledged a slower pivot to Asia while paring its presence in Europe and North America.
"Separation is not consistent with HSBC's business model," the London-based lender said. "HSBC is not a portfolio of discrete domestic banks. It is an integrated bank. Structural steps that create separation within HSBC's integrated model would result in meaningful costs and risks and would damage a core commercial proposition — global interconnectivity — that is a key driver of revenues."
In a more pointed attack than usual, Michael Huang, chairman of Ping An Asset Management, criticized the bank's "closed-minded attitude to all solutions," and said HSBC had refused to engage "verbally" in discussion about Ping An's proposals. The call for "a separately listed Asia business headquartered in Hong Kong" also marked an escalation in its campaign.
HSBC said in the statement that it discussed its conclusions "extensively with Ping An through both multiple meetings and written correspondence." The bank said that it had held about 20 high-level meetings with Ping An in 2022 and 2023, but ultimately the two sides "agreed to disagree on a number of issues."
The latest back-and-forth comes in the run up to the bank releasing its first-quarter results on May 2, which will be followed days later by its annual shareholder meeting. Ping An plans to vote for two resolutions at the bank's AGM that would require the company to publish regular updates on its Asian business, as well as restoring its dividend to its pre-pandemic level, a person familiar with the matter has said. HSBC's board has recommended that shareholders vote against the resolutions.
HSBC said on Wednesday that it had already assessed those suggestions at the start of the year and "concluded that they would also result in a diminution of service to our long-standing HSBC customers, a material loss of value for shareholders, and lower dividends."
The bank repeated its pledge to pay a 21-cent special dividend on the completion of the sale of its Canadian business as it said its existing strategy is on track to deliver higher returns and dividends. It said a standalone listing would result in reduced revenues and returns and the customer experience would be degraded.
It also said any separation would be subject to regulatory approvals in about 25 jurisdictions and material one-off and recurring costs.
It's unclear how large a backing the proposals, which were made by a group of local Hong Kong shareholders, have from other eligible voters. Shareholder adviser Glass, Lewis & Co. has recommended that stock investors vote against the two resolutions.
