My first bank account I ever opened was at Midland Bank, Victoria Street in London. That branch has long since closed, of course, and the building is now occupied by a Shake Shack outlet. I visited it over Christmas with my kids and the burgers were good, but I digress.
Midland was a steady, if boring bank when HSBC acquired it in 1992, in one of the largest bank take overs in the UK at the time. I, and many like me, certainly had great hope that, as a combined entity, it would be world beater for ever more.
31 years later and HSBC is facing a crucial AGM on 5th May where Shareholders will be asked to decide on whether the Bank needs to spin off its Asian business from the rest (Western) business. The instigator of this vote is Ping An Asset Management, one of HSBC’s key Asian Shareholders, who has pushing for a while for just such a corporate action, arguing that it would release over $26bn of Shareholder value.
Mark Tucker and Noel Quinn (HSBC Chairman and CEO respectively) are having none of it, arguing the complexity of a break up and possible loss of synergies as some of the reasons not to head down that road. With the Asian business currently responsible for over 60% of the group profits, a break up would indeed be a huge, and likely messy, exercise. Just the thought of separating the systems would send shivers down my spine.
The problem is, HSBC has been a sluggish performer over at least the last decade, with returns lagging those of its peers and there is certainly a feeling among long suffering Shareholders that something has to give. The only question is what.
It is difficult to say if Ping An has enough support for a spin off vote on the 5th, so difficult to call the outcome. However, even if they lose, I would bet my bottom pound that their campaign will not die with the vote. Instead, it will just up the ante and launch a massive charm offensive to persuade Shareholders. Unless Quinn can reverse the fortunes of HSBC – and fast, the break up calls will become louder and more persuasive – and something will have to give….maybe it will be back to my old Midland bank….