HSBC faces pay anger
LONDON, May 30 (Reuters) – HSBC fought off investor anger on Friday over a pay plan that could see top executives share more than $230 million and dismissed claims its troubled U.S. unit was struggling to finance itself and should be sold.
Several shareholders at the bank’s annual general meeting criticised a new pay plan put forward by Europe’s biggest bank, but the plan won overwhelming approval.
One investor, applauded by others, said the board should follow the example of embattled British Airways Chief Executive Willie Walsh and give up their bonuses.
Just under 82 percent of shareholders, including abstentions, voted to approve the remuneration package — a number well below traditionally overwhelming AGM votes.
But the bank said a maximum payout of over 120 million pounds ($236 million) for executives over three years was unlikely, and awards were likely to come close to the median of a peer group.
HSBC was one of the first banks to flag problems in the U.S. subprime housing market and is estimated to have lost over $10 billion from bad loans and almost $5 billion from writedowns.
Fierce critics of the U.S. strategy include activist hedge fund Knight Vinke, which argues HSBC is underestimating the problems and should either sell or ring-fence HSBC Finance.
“We are working our way through the problems. I believe this business has a future,” Chairman Stephen Green said in answer to shareholder questions. “This is a significant business for us. We are on the case, we are going to see these problems through.”
Green also dismissed Knight Vinke accusations that the bank had poured more than $62 billion into HSBC Finance and said the business was “funding itself perfectly satisfactorily”.
Earlier this month, HSBC said the bad debt charge related to its U.S. consumer finance unit was $3.2 billion for the first quarter — below many analysts forecasts and down from the previous quarter but double the level of the first quarter 2007.
Chief Executive Michael Geoghegan told reporters after the meeting the positive trend was continuing, but warned the first half “always looks better” than the second half of the year.
TOO SOON FOR DEALS
HSBC has warned the United States is likely to face recession this year, with a housing market recovery unlikely before at least 2009, and the bank remained cautious on Friday, warning it was difficult to determine the outlook for the year amid the worst financial turmoil in a generation.
The bank’s key Asian markets, however, were likely to continue to show reasonable growth.
Answering a shareholder question on the bank’s appetite for major deals, Green said current turbulence could throw up acquisition opportunities, but said it was unclear the market was set for a string of transformational mergers. “The commentary often presumes that the current financial market turbulence is going to lead to a lot of transforming deals. We’ll see — I’m not so sure,” he said.
“I am struck by the way the institutions that have found themselves in need of capital have relatively easily been able to find it, so far.”
Geoghegan said the bank continued to look for opportunities in emerging markets, though prices remained high. Even in Eastern Europe, a relatively new area of focus for the bank, executives warned shareholders not to expect headline-grabbing acquisitions.
HSBC posted the highest profits of any bank last year — $24 billion despite $17 billion lost on bad loans. Its shares have fallen less than most rivals, leaving it easily the biggest bank outside China, with a market value of $200 billion.