Chinese insurer Ping An will demand HSBC boost dividends to pre-Covid levels and commit to regularly reviewing its structure at its annual meeting next month, following calls to break off its Asian business.
HSBC’s largest shareholder is planning to support resolutions proposed by a group of retail investors on dividends and structural reform, which includes spinning off operations in Asia to boost returns, according to people familiar with the situation. Ping An declined to comment.
The move by one of the world’s largest insurers, which has an 8 per cent stake in the bank, will put further pressure on the London-listed lender, led by chair Mark Tucker and chief executive Noel Quinn, to return more money to shareholders and review its global operations.
One of the special resolutions, put forward by Ken Lui and other retail investors in Hong Kong, urges HSBC to report quarterly on a plan aimed at “increasing its value by structural reforms”, which includes “spinning off, strategic reorganisation and restructuring its Asia businesses”.
The other resolution calls on HSBC to “implement a long-term and stable dividend policy that . . . should distribute dividends to its members at the pre-Covid-19 pandemic level”, of no less than 51 cents per share a year.
Like other UK-based banks, HSBC was forced to halt dividend payments in 2020, when UK regulators stopped shareholder distributions to shore up balance sheets during the pandemic.
But the suspension of payouts angered investors in Hong Kong, many of whom are individuals relying on the bank’s dividends for their retirement income. Ping An normally expects to generate about $1bn a year from HSBC dividends.
HSBC paid an annual dividend of 51 cents per share for four years from 2015. The bank set its dividend at 32 cents per share for 2022, up from 25 cents in 2021 and the highest level since 2018. It is also planning a 21 cent special dividend, worth $4bn, next year using proceeds from the sale of its Canadian business.
The latest move by Ping An comes after it publicly called on HSBC to spin off its Asian business and be “much more aggressive” on cost cuts at the end of last year. Michael Huang, chair of Ping An Asset Management, told the Financial Times in November: “We will support any initiatives including a spin-off that are conducive to improve HSBC’s performance and value.”
But HSBC has argued that a break-up would be complicated, costly and counterproductive. Quinn said in February: “Alternative structural options . . . would have a material negative impact.”
HSBC also said that “requiring the company to pay a fixed minimum dividend per share . . . restricts the ability of the company to pursue growth alongside returns”, warning that it could trigger higher capital requirements.
“The board recommends all shareholders vote against these two resolutions because they are not in the best interest of the company or its shareholders,” the bank added.