Asian spinoff to hurt HSBC value, say bosses

HSBC stressed spinning off its Asian business will hurt the value of the group and apologized to shareholders for cutting dividends at a special meeting yesterday.

A spinoff will undermine the strengths of HSBC's international business and will have a material negative impact on the bank, chief executive Noel Quinn said at the group's first meeting in three years with Hong Kong retail investors.

HSBC has been under pressure from its biggest shareholder, Ping An Insurance, which called on the lender in April to explore options - including spinning off its mainstay Asia business and listing it separately in Hong Kong.

Such a proposal has earned the support of some local smaller shareholders. A group formed by local investors said a spinoff could release HK$200 billion value of the group.

By splitting HSBC into two and creating a separately listed company headquartered in Hong Kong with a focus on Asia, it would unlock HK$200 billion in potential value, Ken Lui, who started the group, wrote in an open letter to management.

It would be beneficial to HSBC's market value and help increase its dividend payout, Lui went on, adding it would also protect the bank from international geopolitical risks in the long run.

A spokesman for Ping An said it noted the demands expressed by many small and medium-sized shareholders, adding it will support any proposal that is conducive to improving HSBC's operating performance and enhancing the shareholder value.

On shareholders' request to move back the bank's headquarters to Hong Kong to avoid regulatory risks, Quinn said he did not think the bank's current structure has such risks as it has always complied with local laws while believing that it has a relevant mechanism and could manage well as an international bank.

Some investors also requested that the dividend canceled two years ago be repaid as a special dividend.

Quinn and chairman Mark Tucker apologized for the cancellation after a request from UK regulators, adding there is little chance that the same situation will happen again.

A small investor who holds about 500,000 shares with his family criticized the group for using profits in Asia to subsidize losses in other regions, adding that when UK regulators reallowed banks to pay dividends, a number of HSBC's peers restored dividend levels to pre-epidemic levels, or even higher.

He said many elderly shareholders rely on HSBC's dividends as retirement income.

The informal shareholder meeting came a day after HSBC delivered better-than-estimated first-half pretax profits while vowing to resume paying quarterly dividends next year.