Divisions Deepen Among Shareholders Ahead Of HSBC AGM

HSBC's management has "fundamentally failed to address key business model challenges", the bank's biggest shareholder Ping An said on Tuesday, in an escalation of a spat between Europe's biggest bank and the Chinese insurer.

HSBC should separate its Asia business into a Hong Kong-listed entity, Ping An said, in an update to proposals it began urging last November calling for the bank to spin off its Asia business.

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.

"We believe that a structural solution which creates a separately listed Asia business headquartered in Hong Kong will crystallize multiple benefits to all HSBC Group shareholders," Ping An said.

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," a spokesperson for the bank 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 HSBC restore dividends to 51 cents per share and provide regular updates on strategy, including the possibility of spinning off its Asia business.

"In our view, the board's strategy and plans appear valid and are likely to result in greater returns and value, on a risk and cost-adjusted basis, than the overly prescriptive and, in our opinion, unnecessary proposals submitted by the proponent," Glass Lewis said in a note to clients seen by Reuters on Tuesday.

The contrasting positions among HSBC shareholders reflect a deep divide over the direction of Europe's biggest bank, which has struggled in recent years to deliver on long-term profit targets and lift its share price.

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 percent 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. (Reuters)