By Sinead Cruise, Lawrence White and Selena Li
LONDON/HONG KONG (Reuters) – HSBC has “fundamentally failed to address key business model challenges”, its biggest shareholder said on Tuesday, in an escalation of a spat between Europe’s biggest bank and Chinese insurer Ping An.
HSBC should separate its Asia business into a Hong Kong-listed entity, top shareholder Ping An said in an update to proposals it began to push for last November.
The renewed salvo from Ping An comes as shareholder advisory group Glass Lewis urged investors to vote against proposals calling for a strategic review and dividend policy revamp, deepening divisions between factions of the bank’s ownership ahead of its annual meeting on May 5.
HSBC reiterated its stance that the proposals lack merit.
“It is our judgment, supported by third-party financial and legal advice, and with third-party assurance, that alternative structural options will not deliver increased value for shareholders,” an HSBC spokesperson said.
Glass Lewis said the strategic review proposal, filed by individual shareholder Ken Lui in Hong Kong and backed by Ping An, was “not in shareholders’ interest”.
Lui’s resolutions demand that HSBC restores dividends to 51 cents per share and provide regular updates on strategy, including the possibility of spinning off its Asia business.
HSBC also denied a claim by Ping An that the bank had “refused to verbally engage in discussions on the proposals”.
The lender has had extensive discussions with Ping An on these topics, a spokesperson for HSBC said.
The contrasting positions among HSBC shareholders reflect a deep divide over the future of the bank, which has struggled in recent years to deliver on long-term profit targets and lift its share price.
Proposals to split the lender along East-West lines could also attract renewed interest amid rising geopolitical tensions between the hemispheres. Weaker diplomatic ties between the West and China in particular could crimp returns.
Since Ping An began pushing for the Asia spin-off last November, the bank has tried to accelerate plans to exit retail banking in underperforming Western markets such as France and Canada, seeking to deliver on a promise to ‘pivot’ to Asia.
The Chinese insurer, with an 8% shareholding in the bank, would not be able to force a break-up on its own and has so far shown little evidence that it has convinced other large institutional backers of HSBC that its plan has merit.
London listed shares in HSBC were down 0.5% on Tuesday afternoon, against a broad-based 1.3% rally in the STOXX European banks index.
(Reporting by Sinead Cruise and Lawrence White in London and Selena Li in Hong Kong; Editing by David Goodman and Mark Potter)
