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By Sumeet Chatterjee, Felix Tam and Lawrence White
HONG KONG/LONDON, April 6 (Reuters) - HSBC
shareholders in Hong Kong are calling for an extraordinary
meeting with the bank's management and considering legal action
against its decision to scrap dividend payments.
HSBC and other top British banks on Wednesday announced the
suspension of dividend payouts after pressure from the regulator
to conserve capital as a buffer against expected losses from the
coronavirus crisis.
Founded in Hong Kong about 150 years ago as Hongkong and
Shanghai Banking Corp, Europe's biggest bank by assets has a
large number of small shareholders in the city who have long
benefited from the bank's stable dividend payments.
Some of the Hong Kong shareholders have created a Facebook
page, which had more than 3,000 members as of Sunday, to discuss
possible action against the London-headquartered bank's dividend
halt.
"At this stage, we must call an EGM (extraordinary general
meeting) to let the management explain to us," H.T. Chan, a
46-year-old retired driver who is part of the Facebook group,
told Reuters. "For legal action, it depends on what they respond
in the EGM. Hopefully, we can call this meeting."
Shareholders of a company with at least 5% of the total
voting rights may require it to convene an EGM, according to
Hong Kong laws.
As of Sunday, the newly formed HSBC Shareholders Alliance in
Hong Kong had registered members with combined ownership of
about 2% of the bank's stock, Ken Lui, the convenor of the
alliance, told reporters on Monday.
"Our goal is to gather 5% of shareholding to call for an EGM
... we are very optimistic as we have only set up this alliance
four, five days ago."
In a letter to Hong Kong shareholders after the dividend
halt, HSBC Chief Executive Noel Quinn said the bank's board
would review the position once the economic impact of the
pandemic was better understood.
"We profoundly regret the impact this will have on you, your
families and your businesses. We are acutely aware of how
important the dividend is to our shareholders in Hong Kong," he
wrote.
SLIM CHANCE
Analysts and investors saw little chance of the shareholder
group reversing the dividend decision.
"I see the debate about the banks' dividends as a very short
one: regulator tells them what to do and they comply – end of
story," said one London-based institutional investor.
The bank's retail investors have a good chance of forcing
the EGM to happen, said Ed Firth, analyst at KBW in London.
"Whether HSBC holders getting an EGM will result in any
change is far less likely," he said.
"On the margins they may be able to establish that the Bank
of England was responsible for the cut which might be relevant
for future legal actions, but it looks reasonably marginal," he
said.
Hong Kong is HSBC's single most important market, and it is
one of three note issuing banks there.
A spokeswoman for HSBC said on Sunday the bank was not able
to comment on any legal proceedings not yet started.
"I am following the majority action. This is a significantly
essential issue as you have promised substantial and persistent
dividend-paying, but you fail to do that," said Kingsley Chow, a
39-year-old unemployed man relying on dividend income.
"Our first demand, at least, you have to open (an) EGM to
explain to us face-to-face, not just an apology letter!," he
wrote on the Facebook page, referring to Quinn's letter.
(Reporting by Sumeet Chatterjee and Felix Tam in Hong Kong and
Lawrence White and Sinead Cruise in London; Editing by Mark
Potter and Jane Merriman)
