BIRMINGHAM: HSBC soundly defeated a bid to break up the bank and spin out its lucrative Asian business at its annual investor meeting in Birmingham in England on Friday (May 5), but still faced a rebellion against its board and pay for top bosses.

Europe’s biggest bank had faced proposals submitted by Hong Kong-based individual investor Ken Lui and backed by its biggest shareholder, Chinese insurer Ping An to consider a radical restructuring and boost its dividends.

But both resolutions were defeated by about 80 per cent of votes cast at the meeting and HSBC said no other top 50 institutional investors had backed the protest votes.

Ping An also ratcheted up its campaign against HSBC by voting against several other resolutions, including the re-election of HSBC’s chairman Mark Tucker, as well as the pay report for top executives.

These resolutions passed, but with around 20 per cent of votes cast against, which the bank said reflected Ping An’s voting.

HSBC has been contending with a months-long campaign from Ping An to hive off the Asia business that generates most of its profit, against a backdrop of rising geopolitical tensions between China and the West.

The AGM came at the end of a week in which the London-headquartered bank posted a surge in quarterly net profit, boosted by rising interest rates and its rescue of the UK arm of failed US lender Silicon Valley Bank.

“A large majority of HSBC shareholders voted overwhelmingly to support the board,” HSBC chairman Mark Tucker told the meeting.

“That draws a line (under) the debate over the structure of the bank.”

Speaking earlier at the meeting, Tucker insisted the proposal to split the bank was not beneficial.

“We concluded that the alternative structural options would materially destroy value for shareholders, including putting your dividends at risk. This remains our unanimous view today,” he said.

But Ping An, which owns more than 8 per cent of HSBC, argued that the lender lags behind international peers and that a recent improvement in performance was tied mainly to rising interest rates, which it claims have peaked.

The US Federal Reserve this week hinted that it would pause a policy of lifting borrowing costs aimed at cooling inflation.

The European Central Bank on Thursday delivered a smaller interest rate increase than recently as higher borrowing costs begin to take their toll, but said it had “more ground to cover” in fighting red-hot price increases.

A spokesperson for Ping An said the company respected shareholders’ choices, but advised HSBC’s senior managers to listen to investor suggestions “with an open mind” and to take steps to increase company value.

HONG KONG HQ?

Ping An had called on HSBC to engage in a “strategic restructuring” that would see it create a separately-listed bank headquartered in Hong Kong.

Huang said the proposal would allow the bank to retain control over a separate Asia business, adding that management had “exaggerated many of the costs and risks” associated with a split.

HSBC was among a number of major banks to cancel dividends early in the COVID-19 pandemic after an order from the Bank of England, a move that riled some Hong Kong investors.

Some retail investors had cited the dividends cancellation as a reason to back the spin-off proposal.

John Cronin, a banking analyst at Goodbody, said the outcome of the AGM is “a strong rebuttal from the majority of shareholders with Ping An standing as the lone voice pressing for a break-up”.

“I think this closes the door on the proposal for some time – though, under different market conditions, we could see similar such pressures re-emerge,” he added.

Friday’s shareholder meeting faced disruption from climate protesters, a common feature this year at annual general meetings being held by major UK companies.

Environmentalists are pushing for banks to stop funding fossil fuel projects, arguing that while they continue to do, their pledges to help tackle climate change are acts of “greenwashing”.