News Column

HSBC Targets Dividend Growth; Has No Plan To Trim Investment Bank

May 23, 2014

Samuel Agini

LONDON (Alliance News) - HSBC Holdings PLC will continue to target dividend growth in the coming years, Chief Executive Stuart Gulliver said Friday, adding that the bank has no plans to reshape its investment bank or to make any transformational acquisitions.

Addressing shareholders at the bank holding company's annual general meeting in London, the CEO said that HSBC is targeting growth in its dividend despite uncertainty around regulatory capital requirements on the industry.

"Since 2011 we have declared dividends of nearly USD25 billion and we remain committed to returning a sizeable portion of our profit to our shareholders," Gulliver said.

In February, HSBC reported a 9.3% increase in annual pretax profit to USD22.57 billion in 2013, but missed analysts' forecasts of USD24.68 billion. Its full-year dividend was increased to USD0.49 per share, up from USD0.45 in 2012.

HSBC has been streamlining its operations and deploying into capital into areas that can provide greater efficiency and returns, under a strategy unveiled in 2011. Since then, HSBC has announced the sale or closure of 68 businesses it deemed not key to its strategy. Disposing of those businesses has freed up capital to be deployed elsewhere.

"We will continue to invest in organic growth opportunities that are aligned to our strategy, consistent with our risk appetite and which add value to the group," Gulliver said.

"In particular we will increase collaboration between our businesses, further improve connectivity between regions and build on our core strengths," he added.

Gulliver said those businesses include commercial banking, foreign exchange, payments and cash management, HSBC's presence in southeast Asia and Germany, and its home markets of the UK and Hong Kong. Gulliver said that HSBC wants to help drive the internationalisation of the renminbi because its clients in see the ability to settle transactions in the Chinese currency as essential.

Gulliver reiterated HSBC's commitment to making between USD2 billion and USD3 billion of sustainable savings through streamlining.

The CEO told shareholders that recent restructuring announcements made by Barclays PLC and Deutsche Bank AG have no bearing on HSBC. On May 8, Barclays detailed plans to scale back its investment banking activities, shifting parts of its fixed income, currencies and commodities business, traditionally a strong cash generator for investment banks, into a non-core entity, while Deutsche Bank has tapped investors for billions of euros in additional capital.

Gulliver said its investment banking division, global banking and markets, has a different business model to those of its rivals, telling shareholders that the division has gained market share as other banks have scaled back to their domestic markets.

Questioned on HSBC's acquisition policy, Gulliver told shareholders they shouldn't expect HSBC to make any transformational acquisitions at all.

Meanwhile, HSBC defended its pay and bonus plans, with Chairman Douglas Flint's remuneration coming under particular scrutiny.

Simon Robertson, chairman of the remuneration committee, told shareholders that he thinks Douglas is underpaid.

The resolution setting HSBC's remuneration policy for the next three years was carried at the meeting after a shareholder vote.

Under HSBC's policy, the remuneration committee is allowed to award shares to Chairman Flint under exceptional circumstances under HSBC's performance share plan. But the bank came under pressure from shareholders over original proposals to limit any such award made to Flint at 100% of his fixed pay, with many shareholders feeling that limit was too high.

Robertson said the committee decided to limit any potential future award at 44% of Flint's fixed pay after consulting shareholders. He added that any such award would be 'one-off' and exceptional in nature, meaning that no further such award can be made during the three-year term without additional shareholder approval.

HSBC shares were Friday quoted at 614.50 pence, down 0.3%.

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Source: Alliance News

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