Gulliver begins a new chapter

StUart Gulliver, the chief executive of hSBC, faces a herculean task in making a huge and complicated organisation less risky and easier to manage.

In this context, the fixation among some commentators over hSBC’s problems with the UK levy and whether it will drive the bank away from london seems, dare I say it, a little parochial.

true, it has paid out a chunky $3bn since the levy was introduced – which is a lot of money in anyone’s book – and I’m sure its bosses would raise a toast to a climbdown from the Chancellor in his Mansion house speech tonight.

to put it in perspective, however, in recent years hSBC has faced more than $11bn of fines, legal and regulatory bills, much more than the levy. even the costs of implementing its new streamlined strategy, expected to come to $4bn, are higher. hSBC, like its peers, is up against multiple challenges and, because of its size, the difficulties are commensurately greater.

regulation around the world – not just the UK – is getting tougher; a barrage of fines shows no sign of ending; investment banking is no longer the profit engine it was pre- crisis and retail banking is going through a technological revolution of which applePay is just the latest example.

this cocktail adds up to profits that are slimmer and harder to earn.

Gulliver is responding to all of this quite rationally by shrinking the balance sheet, with a major reduction to the weight of investment banking.

the UK job losses and branch closures are unlikely to be the end of the story. he is shifting focus to China and asia, and this raises questions over whether it makes sense for hSBC in the longer term to continue owning the recreated Midland, a retail bank in a mature, relatively minor market like the UK.

It is not hard to see what hSBC and the other banks must do to make themselves ‘investible’ again. they need to be smaller, more efficient and better behaved. Unfortunately that is far easier said than done.

Sorrellcentricity

I’ve observed before in this column that when investors protest about excessive pay it is usually a proxy for some other problem.

In the case of Sir Martin Sorrell, anger about his rewards reflects frustration about succession planning at WPP – or rather, the apparent lack of it.

Sorrell claims that WPP has candidates lined up to take over if he is run down by a bus, and that there are longer term plans for his eventual departure.

Investors are not convinced. In an acidly polite speech delivered to the WPP annual meeting, Standard life’s corporate governance chief Guy Jubb laid bare their con- cerns. Sorrell is the right person to lead the company, but only with the crushing proviso ‘for now’.

Jubb went on to damn chairman Phil lader with faint praise, thanking him for his ‘courtesy, respect and good humour’, but neglecting to mention other attributes he should have displayed, such as independence or toughness.

Sorrell himself cannot be blamed for being Sorrellcentric – to use a word coined by lader. Who wouldn’t be? It must be wonderful to bestride a global media empire.

the chief executive of another large company recently remarked in private that these jobs are dangerously addictive: people cling on to them both for enjoyment and out of fear of losing status and identity. how much more so must that be the case for Sorrell, who founded the company and who describes creating his business as the nearest thing he, as a man, could do to giving birth.

Sorrell is a great entrepreneur, but great entrepreneurs sometimes consider themselves immortal and indispensable.

It is up to new chairman roberto Quarta to break the news to the 70- year- old media mogul that neither is the case.

Trading places

WelCOMe news from the latest trade figures – we are enjoying a record run of exporting more to countries outside the eU than those within, and exports to China have quadrupled in the past decade.

It sounds excellent – but it is not enough to just do better compared with our own past when the world is changing around us. this sobering chart from the Office for Budget responsibility shows how exports have fallen since 1998 as new players have come on to the scene.

as lord Jones of Birmingham pointed out on these pages last week, we need to run much faster just to stand still.