HSBC shareholders in Hong Kong are threatening possible legal action against the bank's scrapping of dividend payments.
HSBC, along with four other British banks, announced the suspension of payouts on Wednesday last week after pressure from the Bank of England. The regulator is urging UK lenders to ensure they shore up their capital reserves as the covid-19 outbreak takes its toll on the economy.
The combined dividend cuts amounted to £7.5bn in cancelled payments.
HSBC is committed to supporting customers in the economies in which we serve, in particular in our two home markets of Hong Kong and the UK. In strengthening its ability to support its customers, the Board believes that HSBC will be better placed to grow its business for the long term."
HSBC was founded as the Hongkong and Shanghai Banking Corporation in 1865 in Hong Kong, and is the city's largest bank. Although headquartered in the UK since 1993, more than a third of HSBC's shareholders are retail investors in Hong Kong. Indeed, HSBC remains synonymous with Hong Kong to such an extent it is widely known as the "Hong Kong bank."
Noel Quinn, HSBC's group CEO, in a letter to Hong Kong shareholders said the board would review the decision at the earliest opportunity: "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."
In a statement on its website, HSBC said: "The Board recognises the current and potential material impact on the global economy as a result of the coronavirus pandemic and the important role that HSBC has in helping its customers to manage through the crisis and to have resources to invest when recovery occurs. HSBC has a strong capital, funding and liquidity position; however, there are significant uncertainties in assessing the time period of the pandemic and its impact."
"HSBC is committed to supporting customers in the economies in which we serve, in particular in our two home markets of Hong Kong and the UK. In strengthening its ability to support its customers, the Board believes that HSBC will be better placed to grow its business for the long term."
Kingsley Chow, a 39-year-old unemployed man relying on dividend income, told Reuters: "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."