HSBC on Friday wins battle by defeating a plan that attempted to divide the bank in an effort to increase profits. The plan was supported by its largest shareholder, the Chinese insurer Ping An who has been trying for over a year to split the bank.
Ping An was unable to secure the support of any significant shareholders after investors decided to reject the idea. The outcome, according to HSBC chairman Mark Tucker, “draws a line” under a protracted discussion concerning the bank’s structure.
Despite having its headquarters in London, HSBC makes the vast bulk of its revenues in Asia. Ping An wants HSBC to divide up its Asian operations since it has an 8% stake in the firm. It contends that the bank’s lucrative activities in Asia are supporting less successful divisions of the bank. Additionally, splitting HSBC would exempt it from UK regulators’ demands.
To force the separation, Ping An and Ken Lui, a stakeholder in HSBC with headquarters in Hong Kong, needed to win 75% of the votes cast at the AGM. No other significant investor supported the concept, therefore they were unable to obtain those figures.
A break-up of the bank, according to HSBC chairman Tucker, would weaken its worldwide ambition and be both hazardous and expensive.
“It would not be in shareholders’ interests to split the bank,” he told the AGM in Birmingham. Climate change activists, who contend that HSBC is not doing enough to curb its financing of polluting industries, regularly interrupted him.
Lui pledged to continue with the break-up proposal at the meeting, saying he would exert pressure on the HSBC management and push the bank’s numerous small shareholders in Hong Kong.
Some observers contend Ping An, which is partially owned by the Chinese government, may serve Beijing’s political objectives more than the financial interests of its owners.
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“There is a jarring gap between HSBC’s centre of gravity in Hong Kong and its subservience to regulators in Britain,” says Steve Vickers, a corporate risk consultant based in Hong Kong. “This is an accident of history and a remnant of the colonial era.”
“A more assertive China is now unafraid to project itself in the international business arena,” said Vickers. “But they have to tread very carefully with HSBC – the stakes are high.”
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