HSBC’S Hong Kong retail investors warm to break-up call

HONG KONG: Smarting from HSBC Holdings Plc’s move to scrap its dividend during the height of the pandemic, the bank’s largely silent mass of retail shareholders in Hong Kong is warming up to the idea of a break-up.

Splitting up Europe’s biggest bank to separate out its Asian operations is being pushed by its largest investor, Ping An Insurance Group Co, based just across the border in Shenzhen.

The call is winning support in Hong Kong’s retail base, which owns about a third of the bank, with some seeing it as a surefire way of preventing the steady stream of payouts from being cut off again.

Their loyalty has been tested as numerous pivots in strategy fail to impress the market, leaving dividends at half of what they were in 2018 and the stock down more than 40%.

The former British colony is the beating heart of the bank’s global operations, accounting for about 30% of the group’s 2021 adjusted profits.

Yet decisions such as the halting of dividends have been driven by regulators in the UK, chafing its local base.

“If the spin-off really happens, management in the Asia unit would have more discretion and autonomy over its decisions, and be less affected by the political factors and UK regulations,” said Ken Lui, an HSBC shareholder and founder of Hong Kong Investor and Entrepreneur Institute.

Lui was the convener of HSBC Shareholders Alliance, a group of 2,000 to 3,000 shareholders that in 2020 unsuccessfully banded together to restore dividends.

The city’s retail shareholders are a fragmented group that have struggled to wield clout in the past.

An attempt to call for an EGM in 2020 to reverse the bank’s decision on dividends failed to reach the 5% required threshold.

HSBC’S management, meanwhile, has rebuffed the plan, hiring Robey Warshaw and Goldman Sachs Group Inc to advise on a defence and has started an internal analysis to push back.

Analysts have also sounded a warning, with Barclays Plc estimating that a split could shave off 3% to 8% of the bank’s market value and cost billions to pull off.

So far, none of HSBC’S biggest shareholders have come out publicly in support of Ping An’s proposal.

While the bank is in the midst of a pivot to Asia, shifting billions of dollars and key roles to the region, the lender also sees its global reach as a key part of its business to position itself as a financing bridge between Asia and the rest of the world.

A spokesman for the bank in Hong Kong said it has a regular programme to engage with all its shareholders. — Bloomberg