HSBC shake-up: Why tongues are wagging over bank’s leadership
It is the talk of the banking sector right now – what on earth is going on at HSBC?
The lender that used to style itself ‘The World’s Local Bank’ is due to present its full year results to investors on 18 February.
This year’s results were already set to attract more interest than usual because Noel Quinn, the bank’s interim chief executive, is also due that day to give details of the outcome of its latest strategic review.
Yet there will now be even more interest after the Financial Times reported on Thursday that HSBC has decided not to name a permanent chief executive at the same time.
The news has surprised investors because, having been appointed interim chief executive as long ago as August last year, Mr Quinn might reasonably have been expected to have been confirmed in the job by the time of the strategic update.
As one leading shareholder told the FT: “It would be very, very odd to have what is being trailed as a large restructuring effort, potentially the most radical we’ve seen from the bank, that is not implemented by the guy who designed it.
“They have had six months, which is long enough to assess internal and external candidates, so if they’re not announcing someone, it is quite obvious there is an internal debate as to whether Noel is the right person.”
What makes the delay all the more baffling is that Mr Quinn, an accountant who first joined the old Midland Bank Group (bought by HSBC in 1992) in 1987, has already made a series of sweeping changes in the ranks of HSBC’s management.
Shortly before Christmas he replaced Marc Moses, the group chief risk officer, a figure so senior that he was one of only four HSBC executives to sit on the bank’s main board of directors.
At the same time Samir Assaf was replaced as head of Global Banking & Markets (GBM), the division that provides financial services to major corporates, governments and financial institutions, with his job being split in two. The departure of Andy Maguire, the bank’s chief operating officer, was also announced.
More changes came when, on Wednesday, James Emmett – who joined as a graduate trainee 25 years ago – was replaced as chief executive of HSBC Bank plc, the UK arm of HSBC.
The explanation for the delay in appointing a permanent chief executive is that Mark Tucker, HSBC’s non-executive chairman, wants to take his time over the appointment.
Mr Tucker, a former chief executive of the Prudential and of the Asian insurer AIA, joined the HSBC board at the beginning of September 2017 and became chairman a month later. Less than two weeks after that, John Flint – an HSBC lifer – was confirmed as the new chief executive, succeeding Stuart Gulliver.
The press release confirming Mr Flint’s appointment said Mr Tucker had “led the search to identify Stuart’s successor”.
All of which implies that not much time was taken over Mr Flint’s appointment. The hard-driving Mr Tucker is said to have told colleagues subsequently that he regrets having appointed him.
So it is entirely understandable that he might wish, on this occasion, to take longer.
A less charitable explanation is that Mr Tucker is exerting more influence over the bank’s day-to-day running than would normally be expected with a non-executive chairman.
At any other bank, this would be unusual, but then HSBC is not just any bank.
Traditionally, the role of chairman at HSBC is more powerful and more hands-on than is typically the case at banks, partly because of the lender’s habitual practice – frowned on by the corporate governance lobby – of appointing a chairman from within.
While Mr Tucker came from outside HSBC, his immediate predecessors – Douglas Flint, Stephen Green and John Bond – all came from inside the bank.
Before then, and for most of HSBC’s existence, the roles of chairman and chief executive were combined and occupied by all-powerful figures, such as Willie Purves, Michael Sandberg and the bank’s legendary wartime supremo Arthur Morse.
So it is not necessarily unusual, of itself, for Mr Tucker to be more hands-on than the typical chairman.
And it may well be that Mr Quinn, who was previously head of Commercial Banking – along with GBM, Global Private Banking and Retail Banking & Wealth Management one of HSBC’s four global businesses – appreciates the support. HSBC, with more than 230,000 employees serving more than 40 million customers across 65 countries, is a juggernaut.
Most industry observers agree it is also deeply bureaucratic and in need of radical surgery.
Its overall performance, for a bank so strongly geared towards the Asia Pacific region, is lacklustre compared with that of peers such as Standard Chartered and Citigroup.
There are also problems in specific parts of the business. The capital-intensive GBM, which grew market share in every product line between 2014 and 2018, is regarded as having had a disappointing 2019. And Mr Quinn himself in October last year singled out HSBC’s performance in mainland Europe and the US, as well as its non-ring fenced (ie the non-retail) bank in the UK as not acceptable.
So HSBC is clearly going to be simplifying its structure. It also needs to cut costs: some 4,700 job cuts were announced in August last year, followed by 10,000 more in October, but there is speculation that thousands more job losses could be announced later this month.
There is also an expectation that the bank will retrench in specific markets, such as France, where it is said to be looking for a buyer for its retail arm. Turkey is another territory from which it may exit.
The problem is that, if Mr Quinn is not to be appointed chief executive on a permanent basis, whoever eventually does get the job may not necessarily want to implement his plan. They will inevitably want to make changes of their own.
The betting has to be that Mr Quinn, having had to endure a very public six-month audition, is eventually confirmed in the role.
But it is curious that his appointment has not been made prior to the announcement of the strategic review.
Source: Read Full Article