Chinese shareholder Ping An argues for a split because the bank is lagging behind international peers.
Banking giant HSBC is facing a shareholder vote on a proposal from its largest stakeholder, Chinese insurer Ping An, to split the company to earn better returns.
Asia-focused HSBC has urged shareholders to vote against the proposal at its annual general meeting in Birmingham, central England, on Friday.
The vote comes at the end of a week in which the London-headquartered bank posted a strong increase in quarterly net profit, boosted by rising interest rates and the rescue of the UK arm of failed US lender Silicon Valley Bank.
Ping An has argued that the lender is lagging behind international peers, and that a recent improvement in performance was linked to rising interest rates, which he claims have peaked.
The US Federal Reserve hinted this week that it would pause a policy of raising borrowing costs to cool high inflation.
The European Central Bank, meanwhile, made a smaller rate hike on Thursday as higher borrowing costs begin to take their toll, but said it had “more ground to cover” in the battle against red-hot price increases.
“It is imperative for HSBC to push for structural reforms to fundamentally address HSBC’s underlying competitive issues,” said Michael Huang, chairman and CEO of Ping An Asset Management, recently.
Ping An is calling on HSBC to participate in a “strategic restructuring” that would see it create a separately listed bank headquartered in Hong Kong.
Huang said the proposal would allow HSBC to retain control of a separate Asia company.
He adds that the bank’s management has “exaggerated many of the costs and risks” associated with a split.
HSBC was among a number of big banks to cut dividends early in the COVID-19 pandemic following a de facto order from the Bank of England – a move that left some Hong Kong investors off guard.
Some retail investors have cited the cancellation of dividends as a reason to support Ping An’s spin-off proposal.