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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  HSBC Holdings Plc    HSBA   GB0005405286

HSBC HOLDINGS PLC

(HSBA)
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Tough Conditions Test HSBC's Fill-In CEO -- WSJ

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10/21/2019 | 02:48am EST

By Margot Patrick

HSBC Holdings PLC started 2019 with a chief executive poised for growth and focused on making its 238,000 employees the "best version of themselves." It is ending the year with a new boss cutting thousands of jobs, culling clients and putting businesses on the block.

The change in approach was triggered by storm clouds in the bank's two most important markets. Violent antigovernment protests have rocked Hong Kong, while the U.K. economy is being tested by uncertainty over its planned exit from the European Union.

The bank, among the world's largest by assets, is also under strain in China, the country it is counting on for profit. It angered some officials by sharing information with U.S. prosecutors about one of its clients, Huawei Technologies Co.

For HSBC's board, the tougher conditions were a wake up-call that it is still too much bank in too many countries. Its response in August was to swap out chief executive John Flint, a 30-year veteran of the bank who improved financial performance but underwhelmed a chairman looking for quicker fixes.

Chairman Mark Tucker -- the first outsider in the post -- asked Noel Quinn, head of commercial banking, to be interim CEO. Mr. Quinn has told colleagues he aims to make the job permanent. Some analysts predict an announcement as soon as December.

The 57-year-old's plan to earn it: exit low-growth businesses and ax costs to better compete with international rivals such as JPMorgan Chase & Co. and Citigroup Inc.

Mr. Quinn has sped up plans to sell HSBC's large French retail bank and is going deeper with the job reductions that were started this year.

In August, the bank's finance chief said the lender needs to be harder on low-profit customers in Europe and "reprice them or exit." Now, thousands of clients in HSBC's global banking and markets business and commercial bank are being reviewed to see if they are worth keeping, people familiar with the matter said.

Analysts anticipate more retail disposals and scaling back in investment banking activities. HSBC exited around 20 countries and dozens of businesses this decade. But it still has choices to make on allocating capital across its remaining 65 countries.

"'The world's local bank' was a great marketing line but it wasn't a great corporate strategy," said Mike Fox, a fund manager at Royal London Asset Management holding shares in the bank.

In private meetings with investors in recent weeks, Mr. Quinn has assured them the bank's heart and soul is still in Asia, its most profitable region, people familiar with his comments said. HSBC makes around one-third of revenues in Hong Kong, where it began in 1865.

Mr. Quinn said the bank continues to win business from Chinese clients despite the Huawei tensions, a person familiar with his comments said. Data show HSBC worked on several Chinese bond deals last month, including for state-owned banks.

In 2017, HSBC supplied U.S. investigators with details of what Huawei told the bank about its business in Iran, according to court documents and people familiar with the information exchange. The Justice Department alleges Huawei misled banks about its dealings in Iran. HSBC cut most banking ties with Huawei in 2017, The Wall Street Journal previously reported.

An HSBC executive said some Chinese companies opted not to do business after the bank was attacked in state media. In July, it was left off a new panel setting China loan rates, and it is still waiting on a license some rivals received to underwrite corporate bonds in the country.

People familiar with the matter said HSBC has good standing with officials. One said Mr. Tucker was invited to attend China's 70th anniversary parade Oct. 1 in Beijing but couldn't make it.

Mr. Quinn wasn't even in the running in the last CEO search, shortly after Mr. Tucker joined as chairman in 2017. Plain spoken and practical, he has been at the bank since 1987. He initially ran leasing businesses, then went to Hong Kong in 2011 to head commercial banking in Asia and got the job globally in 2015.

External CEO candidates are division heads at banks such as Citigroup, and former and current bank CEOs, according to people briefed on the search.

"Finding an external candidate is very hard. They have to understand the bank, Hong Kong, and Hong Kong and China," said Ronit Ghose, an analyst at Citigroup.

Mr. Quinn has said he never expected to be in the job, in part because he didn't fit the usual profile. Most of HSBC's CEOs rose through an elite, career-long "international managers" program.

Those include Mr. Flint, 51, who rotated through posts in Asia, the U.S. and Britain on a regimented track to the C-Suite. He was Mr. Tucker's pick for the job in 2017, but their styles clashed almost immediately. Mr. Tucker, who had just completed a successful run as CEO at insurer AIA Group Ltd., was largely in sync with Mr. Flint on strategy but considered him too ponderous on decisions, according to people who worked with them.

Mr. Flint, in turn, found Mr. Tucker to be imperious and not open to being challenged, according to a person familiar with his thinking.

Mr. Quinn's decision making is "more instinctive," said an executive who served with him on HSBC's senior management team.

His name was one of several on a "hit by a bus" list to replace Mr. Flint in unexpected circumstances. He was chosen after Mr. Tucker told Mr. Flint his career at the bank was over at a weekly catch-up meeting in late July at HSBC's private bank in London.

Mr. Flint, asked not to return to his office at HSBC's Canary Wharf headquarters, called in sick for a few days while the bank negotiated the terms of his departure and prepared an announcement, a person familiar with the matter said.

Mr. Quinn "brings pace, decisiveness and ambition," Mr. Tucker said announcing the appointment Aug. 5.

--Julie Steinberg contributed to this article.

Write to Margot Patrick at margot.patrick@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
AEROJET ROCKETDYNE HOLDINGS, INC. -0.79% 43.3 Delayed Quote.23.76%
AIA GROUP LIMITED -2.08% 77.85 End-of-day quote.19.77%
CITIGROUP INC. -1.42% 73.83 Delayed Quote.43.72%
HSBC HOLDINGS PLC -0.74% 576.4 Delayed Quote.-10.23%
JPMORGAN CHASE & CO. -0.68% 129.795 Delayed Quote.33.80%
WHARF (HOLDINGS) LIMITED -1.52% 18.2 End-of-day quote.-10.78%
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Financials (USD)
Sales 2019 55 055 M
EBIT 2019 21 699 M
Net income 2019 12 889 M
Debt 2019 -
Yield 2019 6,79%
P/E ratio 2019 11,6x
P/E ratio 2020 10,8x
Capi. / Sales2019 2,74x
Capi. / Sales2020 2,68x
Capitalization 151 B
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Mean consensus UNDERPERFORM
Number of Analysts 24
Average target price 7,91  $
Last Close Price 7,51  $
Spread / Highest target 48,0%
Spread / Average Target 5,38%
Spread / Lowest Target -15,8%
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Managers
NameTitle
Noel Quinn Chief Executive Officer & Executive Director
Mark Edward Tucker Non-Executive Group Chairman
Andrew Mitchell Maguire Group Chief Operating Officer
Ewen James Stevenson Chief Financial Officer & Executive Director
Darryl West Chief Information Officer
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CHINA CONSTRUCTION BANK CORPORATION-0.31%206 995