With the results of the vote announced, HSBC chairman Mark Tucker can finally declare victory at the end of this month’s acrimonious annual general meeting in Birmingham.
Tucker has had a hot year in a war of words with Chinese insurer Ping An, HSBC’s largest shareholder, who turned activist at the bank’s last annual shareholder meeting to demand that the 158-year-old lender be sacked. split into two.
Yet despite its ongoing and high-profile campaign, the vote confirmed that Ping An failed to secure the support of any of HSBC’s other large institutional shareholders. A special resolution backed by China’s Ping An to call for an East-West split failed with just under 20 percent support, well below the 75 percent needed to succeed.
For Tucker and HSBC, the victory brought breathing room. But it fails to answer the most important question that will determine what happens next: Was Ping An’s intervention directed by Beijing, or did it acquiesce?
Hugh Young, Asia-Pacific chairman of British asset manager Abrdn and a shareholder of HSBC, said calls to split the bank in two “make no clear commercial sense” but that “political risk makes HSBC an unrealistic business” . Investors were “darkly speculating” on Beijing’s involvement, he said.
After the AGM, Ping An appeared to soften its stance, shifting from accusing HSBC of exaggerating the “costs and risks” of spinning off its Asian operations to issuing a statement saying it respected “shareholders’ choices” and advising management to “listen to shareholders’ views.” ” ‘Suggestions with an open mind’.
People close to HSBC said the new tone suggested that Ping An might be preparing to tone down its promotional activities. They point out that the bank’s shares have risen 24% over the past year, compared with a 4% rise in the FTSE.
But there are signs that it is too early to call a split. HSBC has long been mired in U.S.-China tensions, a stance that Ping An believes is impossible to sustain.
“This is a discussion that’s not going away,” said Morningstar equity analyst Michael Mark Dadd. If the bank delivers strong results this year, with high interest rates boosting profits, then “we might not have a major conflict. . . but if the returns aren’t satisfactory, it will heat up immediately”.
Over the past year, Ping An has scored some victories.
HSBC responded to the pressure by stepping up cost-cutting and paying dividends to shareholders. It has agreed to sell its Canadian business for $10.1 billion — which will fund a special dividend of 21 cents when it closes next year — and has agreed to exit operations in Greece, Russia and the US.
A planned sale of its retail network in France to private equity group Cerberus is likely to fail, but the bank’s chief financial officer, Georges Elhedery, told Reuters this week that it was considering selling or scaling back operations in 12 countries but had not yet done so. Be specific.
HSBC has also overhauled executive pay so that it is more closely linked to performance in Asia, and has pledged to pay dividends quarterly rather than once or twice a year as it has done during the pandemic – a challenge for some Asian shareholders. The key requirement, they used to treat steady dividends as an almost bond-like source of income.
“Our performance shows that our strategy is working,” an HSBC spokesman said. “We are generating strong returns for our shareholders and we are confident about the future.”
Beijing support?
HSBC chief executive Noel Quinn has consistently denied any indication that Ping An’s campaign was politically motivated.
Senior figures in mainland China and Hong Kong have assured HSBC executives that the dispute is being viewed as business rather than politics – taking comfort in the fact that HSBC has secured more financial licenses and been given full control over joint ventures on the mainland , including its Fund management business in May.
The bank’s leadership, including Tucker and Quinn, was also allowed to meet with a number of deputy prime ministers and ministers this year, many of which were covered by domestic media and posted photos on WeChat as a formal seal of approval.
“When the Chinese treat you like a foreigner, they slow down license applications, delay hiring approvals, ban branch openings, and you see your peers get treated better,” said a senior executive at the bank. officials said.
HSBC experienced the treatment after it provided critical information to U.S. prosecutors, who in 2017 filed charges against Huawei and its chief financial officer, Meng Wanzhou, who was arrested in Canada. She was later released in 2021 after pleading guilty to defrauding lenders to violate sanctions on Iran.
During that time, “we observed a little bit of a slow reaction to things, everything was dragging on, we were definitely in the doghouse, not the favorite kids,” the veteran said. “But we don’t see that now.”
But shareholders, rivals and even some HSBC executives have said privately that Beijing’s involvement — or at least support — cannot be ruled out.
“HSBC is clearly a big icon in the west . . . (the message is) ‘don’t get too comfortable’,” said a person close to the bank.
“It’s more complicated than saying ‘this is top-down from Beijing’,” said a senior HSBC executive. But the insurer may have “got a tacit ‘no objection’ from the political establishment to move forward”.
local battle
A local campaign group that shares some of the same goals as Ping An shows no sign of backing down, Breaking Up HSBC Now, which said it represented retail shareholders in Asia, filed an unsuccessful annual general meeting motion to break up the Ping An-backed bank.
Its figurehead is Ken Lui, a 42-year-old investor who made his money in real estate, according to his spokesman. “Next year we will definitely (submit a resolution) again,” he told the Financial Times in an interview. “If performance does not improve, we will ask (chairman and CEO) to step down.”
Ray, who was traveling to Birmingham for the annual general meeting, said he had had a video call with Ping An before the meeting at which the insurer agreed to vote in favor of his resolution. But he denied that he had received any financial support from Ping An, saying the campaign was funded by profits from rising HSBC shares.
Christine Fong, a councilor for Hong Kong’s Professional Powers district, continued to fight alongside Lu, calling the group politically independent.
“We still support the spin-off of the Asian business,” she told the FT, adding that she wanted Ping An to have “sufficient representation” on HSBC’s board. She said that she has not contacted Ping An for more than a year, and has not received financial support from Ping An.
“The annual general meeting is a good start,” she said. “We’ve got close to 20 percent, so I think every year we probably have a resolution, especially if it’s underperforming.”
Ping An has remained silent since its brief statement after the failed AGM and declined to comment on the matter.
One option for insurers is to continue to stick with their executives while shifting focus, ramping up pressure to appoint more senior executives and board members from their Asian operations, rather than simply bringing some senior Western bankers to the table. to Hong Kong.
Executives at rival banks in Hong Kong are skeptical that Ping An will aim for token wins, such as calls for HSBC to move its global headquarters to Hong Kong. It was not until the early 1990s, when HSBC took over Midland Bank, that the headquarters moved to London.
Ping An’s next move may shed light on its motivations.
Some HSBC executives believe that if the failed Ping An continues to argue for breaking up the bank – despite losing the primary vote and winning a financial windfall – “it will show that this is motivated by politics rather than a return on capital”.