HSBC's disgruntled HK retail shareholders campaign for spinoff

© Reuters. FILE PHOTO: A logo of HSBC is seen on its headquarters at the financial Central district in Hong Kong, China August 4, 2020. REUTERS/Tyrone Siu

By Selena Li

HONG KONG (Reuters) -A small group of HSBC's Hong Kong-based retail investors are seeking support to put a resolution to the bank's 2023 annual meeting calling on it to restore its pre-pandemic dividend and set a plan to spin off assets. HSBC "underperforms its peers, violates dividend commitments (and) ignores shareholders' interests," Ken Lui, convener of a group of shareholders calling for the spin-off of HSBC Asia's business, said in a newspaper advertisement on Thursday.

The London-headquartered lender, opposed to breaking up its business [L1N2ZD05M], dismissed the possibility of the proposal gaining traction among large shareholders.

"The conversations we've had with other institutional investors are that they also do not believe there is an economic case for splitting the bank," a spokesperson for HSBC said in written reply to a Reuters query.Shareholders including Lui began pushing for the spinoff earlier this year. Their latest effort comes weeks after top HSBC shareholder, Ping An Insurance Group Co of China, made its first public comments on the spin-off push, urging the lender to aggressively reduce costs and dispose of assets.

Lui said he had not reached out to Ping An but would welcome the Chinese insurer joining his group's campaign.

Hong Kong is HSBC's biggest market and home to many retail shareholders. Some who are outside Lui's group have also vocally supported Ping An's spin-off proposal.

But they are unlikely to have the heft to force a vote on a break-up, analysts said.

HSBC said in August a spinoff would mean potential long-term hits to its credit rating, tax bill and operating costs and would bring immediate execution risks.

DIVIDEND SUSPENSION

Hong Kong retail shareholders have been particularly upset since HSBC scrapped its formerly stable dividend in 2020 during the COVID-19 pandemic, when the Bank of England asked lenders to conserve capital. The bank has resumed paying a dividend but not quarterly, and retail investors are dissatisfied with payouts that, overall, are smaller than before. The bank has said repeatedly this year that it will resume quarterly dividends beginning in early 2023. Lui told Reuters that for the campaign he had contacted about 500 investors in HSBC, from individuals to institutions. Under Britain's Companies Act of 2006, 100 minority shareholders with the same demand could propose a resolution at the annual meeting of HSBC in April 2023, he said.It would call for a return to quarterly payments totalling $0.51 a share per year, HSBC's usual pre-pandemic rate, and for management to prepare a definite spin-off plan.

The HSBC spokesperson said: "We are targeting a dividend payout ratio of around 50% for 2023 and 2024."

But the quarterly dividend payout could be at a lower level than the historical $0.10 per share, the spokesperson said. The bank usually paid $0.10 per share for three quarters then $0.21 in the final quarter.

The bank remains "on track to hit all of our financial targets", including a return on tangible equity of at least 12% from 2023 onwards, according to the emailed statement.

Hong Kong-listed HSBC shares were down 1.77% on Thursday, while the benchmark Hang Seng index lost 1.55%.