As the vote results came in, HSBC chair Mark Tucker could finally declare victory at the end of a fractious annual general meeting in Birmingham this month.
Tucker had spent a torrid year locked in a war of words with HSBC’s largest shareholder, Chinese insurer Ping An, who had turned activist at the bank’s previous AGM with a demand the 158-year-old bank be split in two.
However, despite its persistent and attention-grabbing campaign, the vote confirmed that Ping An failed to secure support from any of HSBC’s other large institutional shareholders. A special resolution backed by Ping An calling for an east-west break-up failed, winning just shy of 20 per cent, far short of the 75 per cent needed for success.
For Tucker and HSBC the victory brought breathing room. But it failed to answer the most important question dictating what happens next: is Ping An’s intervention directed, or tacitly approved, by Beijing?
The call to split the bank in two “did not make clear business sense” but “the politics risk making HSBC an impractical business”, said Hugh Young, Asia-Pacific chair of the UK asset manager Abrdn, an HSBC shareholder. Investors were “guessing in the dark” on Beijing’s involvement, he said.
After the AGM, Ping An appeared to soften its stance, moving from accusations that HSBC was exaggerating the “costs and risks” of spinning off its Asian operation to a statement saying it respected “shareholders’ choices” and advised management “to listen to shareholders’ suggestions with an open mind”.
People close to HSBC say the new tone indicates Ping An may be ready to de-escalate its campaign. The bank’s share price is up 24 per cent in the past year, compared with a 4 per cent gain in the FTSE index, they point out.
But there are signs that it would be premature to assume a split is off the table. HSBC has long been caught up in tensions between the US and China, a position Ping An has argued is impossible to sustain.
“This is a discussion that’s not going to go away,” said Michael Makdad, an equity analyst at Morningstar. If the bank delivers strong results this year, with high interest rates boosting profits, then “probably we’re not going to have a major conflict . . . but if returns are not satisfactory it will heat right back up”.
One year into its campaign, Ping An can already claim some victories.
HSBC has responded to its pressure by speeding up cost cuts and handing payouts to shareholders. It has agreed a $10.1bn deal to sell its Canadian business — which when finalised next year will fund a special 21 cent dividend — and has already agreed exits from operations in Greece, Russia and the US.
A planned sale of its retail network in France to the private equity group Cerberus may fall apart but the bank’s chief financial officer Georges Elhedery told Reuters this week that it was considering selling or scaling back businesses in 12, unspecified, countries.
HSBC has also overhauled executive pay to link it more closely to performance in Asia, and committed to paying dividends on a quarterly basis rather than once or twice a year as it did during the pandemic — a key demand of some shareholders in Asia who treated historically steady dividends as an almost bond-like source of income.
“Our performance shows our strategy is working,” an HSBC spokesperson said. “We are generating strong returns for our shareholders, and we are confident about the future.”
Backed by Beijing?
HSBC chief executive Noel Quinn has consistently denied there is any indication that Ping An’s campaign is politically motivated.
HSBC executives have been reassured by senior figures in China and Hong Kong that the dispute is viewed as commercial, not political — they take comfort from the fact that it has won additional financial licences and been approved to take full control of joint ventures on the mainland, including its fund management operations in May.
The bank’s leadership, including Tucker and Quinn, have also been granted meetings with various vice-premiers and ministers this year, many of which have been covered by domestic media and the photos published on WeChat, taken as an official seal of approval.
“When the Chinese are dealing with you as a foreigner, they slow down applications for licences, delay hiring approvals, ban branch openings and you see your peers getting better treatment,” said a senior figure at the lender.
HSBC experienced that treatment after it provided crucial information to US prosecutors pursuing a case against Huawei and its chief financial officer Meng Wanzhou in 2017, who was arrested in Canada. She was later released in 2021 after admitting to deceiving lenders in order to breach sanctions against Iran.
During that time “we observed some slow response times to things, everything was dragged out, we were definitely in the doghouse, not the favourite child”, the senior figure said. “But we just don’t see that now.”
But shareholders, rivals and even some HSBC executives say privately that Beijing’s involvement — or at least support — cannot be ruled out.
“HSBC is clearly a big western symbol . . . [the message is] ‘don’t get too comfortable’,” a person close to the bank said.
“It’s significantly more complicated than saying, ‘this is coming top-down from Beijing’,” a senior HSBC executive said. But the insurer might have “got a tacit, ‘no-objection’ from political bodies to push ahead”.
Local battle
A local campaign group that has some of the same objectives as Ping An shows no sign of backing down, Spin Off HSBC Now, which says it represents retail shareholders in Asia, filed the unsuccessful AGM motion on splitting the bank that Ping An supported.
Its figurehead is Ken Lui, a 42-year-old investor who made his money from property, according to his spokesperson. “We will certainly [submit the resolutions] again next year,” he said in an interview with the Financial Times. “If performance doesn’t improve we will ask [the chair and CEO] to step down.”
Lui, who travelled to Birmingham for the AGM, said he had held video calls with Ping An in the run-up to the meeting at which the insurer agreed to vote for his resolutions. But he denied that he had received any financial backing from Ping An and said the campaign was funded by profits from HSBC’s increasing share price.
Christine Fong, a Hong Kong district councillor for Professional Power, a grouping she describes as politically independent, is continuing the battle alongside Lui.
“We still support the spin-off of the Asian business,” she told the FT, adding that she wanted Ping An to have “adequate representation” on HSBC’s board. She said she had not been in contact with Ping An for more than a year and received no financial backing from the group.
“The AGM was a good start,” she said. “We have almost 20 per cent, so I think every year we’ll probably raise a resolution, especially if there’s underperformance.”
Ping An has fallen silent since its brief statement after the AGM defeat, and declined to comment for this story.
One option would be for the insurer to keep holding executives’ feet to the fire while shifting its focus, ramping up pressure for it to appoint more senior executives and board members from the ranks of the Asia business rather than simply moving some senior western bankers to Hong Kong.
Senior executives at rival banks in Hong Kong wonder whether Ping An might aim for a symbolic victory, such as calling for HSBC to relocate its global headquarters to Hong Kong. The headquarters was moved to London only in the early 1990s, when HSBC took over Midland Bank.
Ping An’s next step might shed light on its motives.
Some senior HSBC executives believe that if a defeated Ping An were to continue arguing to split the bank — despite having lost a major vote and won financial windfalls — it “would suggest this is politically motivated rather than return-on-capital motivated”.