HSBC shareholder starts group to rally support for Ping An break-up plan

HONG KONG (BLOOMBERG) – An activist HSBC Holdings shareholder in Hong Kong is convening a group to push for the spin-off of the lender’s Asia business, adding to pressure on the London-based bank ahead of a meeting with investors in the Asian financial hub on Tuesday (Aug 2).

Mr Ken Lui, the shareholder and founder of the Hong Kong Investor and Entrepreneur Institute, is seeking to build on an effort from 2020 when he gathered about 3,000 local investors to protest against HSBC’s move to stop paying dividends as Covid-19 erupted.

“We are trying to engage the same group of people and also, of course, we welcome new shareholders as well,” he said.

Mr Lui’s efforts back then, as the convener of HSBC Shareholders Alliance, were ultimately unsuccessfully as the bank heeded calls by British regulators to skip dividends. He is now getting behind a plan by HSBC’s largest single investor, Ping An Insurance Group, to split up the lender.

HSBC on Monday posted better-than-estimated profits and pledged to return to paying quarterly dividends next year as it sought to head off the call to split up. HSBC chief financial officer Ewen Stevenson also said it is hard to find value for shareholders in a potential split.

Geopolitical risk

Mr Lui said a split would make it easier for HSBC to navigate the rising tension between China and the West.

“On the one hand, in Asia, they have to live by the rules and regulations in China, but in the UK, they have to face regulations from the UK government,” he said. “This creates risk for both HSBC and the shareholders.”

Mr Lui said that he is disappointed with HSBC’s management, particularly in the move to suspend dividends. A spin-off is likely to increase the lender’s ability to pay dividends to its local shareholders, he said.

Hong Kong’s retail shareholders are a fragmented group that have struggled to wield clout in the past. An attempt to call for an extraordinary general meeting in 2020 to reverse the bank’s decision on dividends failed to reach the required threshold.

So far, none of HSBC’s biggest shareholders have come out publicly in support of Ping An’s proposal. HSBC’s management has rebuffed the plan, hiring investment banks Robey Warshaw and Goldman Sachs to advise on a defence.

Mr Lui’s new effort will be called the “Spin Off HSBC Asia Concern Group”.