HSBC hunts new leader to navigate China risks
Lending giant with deep roots in West and China seeks replacement for outgoing chief of five years
HSBC has launched a hunt for a new chief executive after Noel Quinn unexpectedly stepped down to pursue a better work-life balance.
Mr Quinn’s retirement after five years in charge has triggered a succession battle at one of the world’s biggest banks. It comes at a politically delicate time for the bank, with HSBC increasingly torn between its British headquarters and its profit centre in China.
HSBC chairman Mark Tucker said the bank would look internally and externally for a replacement for Mr Quinn, who has run the lender since 2019 and was paid £10m a year as chief executive.
City sources said HSBC’S finance chief Georges Elhedery was the frontrunner to replace the 62-year-old.
He was promoted to the finance role last year, with Mr Quinn saying at the time that Mr Elhedery’s appointment was part of the bank’s succession planning. Mr Elhedery, 50, recently took a sabbatical to learn Mandarin in a sign he was being groomed for the top job.
HSBC’S wealth management head Nuno Matos and global commercial bank head Barry O’byrne, who lead the bank’s biggest divisions, are also leading candidates to take charge.
Citi analysts named Lloyds Bank chief Charlie Nunn, OCBC Bank boss Helen Wong and former Standard Chartered banker Simon Cooper as other potential contenders.
Hiring an outsider would break with HSBC’S tradition of promoting from within its own ranks. However, all three of the outsiders named by Citi as potential candidates have previously held senior positions inside HSBC.
Shore Capital analyst Gary Greenwood said: “HSBC has always been a huge bureaucracy. You need a political operator who can navigate that.”
HSBC is worth nearly £150bn, employs more than 221,000 across 64 different countries and has $3 trillion (£2.4trillion) of assets. The sprawling nature of HSBC and its deep roots in both China and the West have made it increasingly politically vulnerable as geopolitical tensions have ratcheted up.
The succession battle could reignite pressure on the bank to shift more of its operations to Asia, or to promote an Asian banker to the chief executive job.
Chinese insurance giant Ping An, which is HSBC’S biggest investor, has previously expressed concerns about the lack of senior executives from the Asian side of the business.
HSBC’S top Asian-based executives are Surendra Rosha and David Liao, who co-lead the bank’s Asia-pacific business. Mr Rosha is from India while Mr Liao was born in Hong Kong.
Ping An, which owns 8.8pc of the bank, previously launched an unsuccessful campaign to break up the bank and spin off its Asian business.
A source said the headquarters of the group was “not up for debate”.
Quilter Cheviot equity analyst Will Howlett said the bank’s financial performance was likely to placate any demands for change from investors.
He said: “Profits are strong at the moment and they’ve done some heavy lifting in terms of pivoting towards Asia. I feel they’re doing enough.”
The bank has not officially hired headhunters but has previously used Russell Reynolds for its senior recruitment processes. HSBC declined to comment on possible appointments.
Announcing his decision to step down, Mr Quinn said he wanted “to get a better balance for me personally and spend more time with my family. Doing this job, you have to give 100pc, if not 120pc of your energy, your mindset and your time to the role”.
A source added: “People underestimate how taxing running a bank is, especially with the level of regulation.”
The Birmingham-born banker will formally stay in place until April 2025 but will step back from duties once a new chief is appointed.
HSBC made record profits last year and its dividends and share buybacks are at a 10-year high. Mr Quinn said this marked a good moment to bow out.
The bank announced that pre-tax profits fell by $200m (£160m) to $12.7bn in the first quarter of 2024. Shares in the bank rose 4.1pc in London yesterday.
‘Managing the geopolitics between the West and the East is going to be a big skill for the next chief executive’
HSBC chief executive Noel Quinn and chairman Mark Tucker were in an unusually jovial mood early yesterday morning.
Rather than focusing on Quinn’s unexpected departure after five years at the helm, the two bankers spent time on a media call joshing about their respective football teams, Aston Villa and Chelsea.
However, lurking beneath this levity is a broader question of whether Quinn’s exit will tilt the London-based bank’s centre of gravity more firmly towards its dominant market in Hong Kong.
When asked about Quinn’s successor yesterday, Tucker refused to be drawn on whether the new chief could come from the ranks of its Asian businesses, where the lender makes the bulk of its profits.
“We will go through a proper process and we’ll let you know as soon as we come to a conclusion,” he said.
Several internal candidates are already in the frame, including finance chief Georges Elhedery. But the shake-up is likely to reignite the long-running debate over whether HSBC needs to pivot away from the West towards Asia and China.
Will Howlett, an analyst at Quilter Cheviot, said: “Managing the geopolitics between the West and the East is going to be a big skill for the next chief executive.”
HSBC is well-acquainted with geopolitical scrutiny. Formed as the Hong Kong and Shanghai Banking Corporation in 1865 when the territory was still a British colony, the bank has long sought to maintain strong ties with China. However, this deft art has become a growing challenge in recent decades after the country took back control of Hong Kong in 1999.
As for its UK presence, the lender cemented this by acquiring the Midland Bank in 1992.
However, this only further enhanced HSBC’S divide between East and West, with operations split across a single corporate animal. Recent political flare-ups have since renewed focus on the bank’s global make-up.
Sherard Cowper-coles, the bank’s top government affairs executive, was forced to resign last year after criticising the UK for mirroring America’s hard-line approach to China.
Inevitably, Quinn’s successor will have to tread the line carefully. “HSBC has always been a huge bureaucracy, says Gary Greenwood, of Shore Capital. “You need a political operator who can come in and navigate that.”
As one of the largest banks on Earth, with a balance sheet almost equivalent to UK GDP, the bank’s significance spans way beyond its London headquarters and a
FTSE 100 listing. This is evident given that Hong Kong represents a bigger proportion of HSBC’S profits, accounting for $10.7bn (£8.6bn) versus $8.3bn for the UK.
The bank’s customer deposits in Hong Kong also tip the scales at $544bn, against $340bn in Britain.
However, despite the Asian focus, the bank’s management and board have long skewed towards the UK.
HSBC chief executives have historically come from the Western side of the bank. Quinn’s predecessors, including John Flint, Stuart Gulliver, Michael Geoghegan, Lord Green, Sir Keith Whitson, Sir John Bond and Sir William Purves, have all ascended through HSBC’S UK ranks. Could Tucker decide to rip up the rulebook and base the new chief executive in Hong Kong?
The likelihood is slim, say analysts. “Whoever comes in will need to have a good knowledge of the Hong Kong market, albeit they will have supporting management entrenched in the region,” says Greenwood.
“HSBC’S headquarters are still in London so if they were going to have the chief executive out in Asia they would need to move the headquarters to Asia as well.”
One source of pressure to tilt more towards Hong Kong could come from the bank’s Asian shareholder base.
Ping An, HSBC’S largest shareholder, has been trying to persuade the bank to spin off its Asian business for a number of years. Tensions burst into the open last year when Ping An signalled it would support a resolution at the HSBC annual meeting demanding the bank regularly review its structure.
It was a shot across the bow for the lender and masked deeper concerns from Ping An about how HSBC was run. The Asian insurer, which owns 8pc of the FTSE 100 giant, has also previously demanded HSBC Asia be spun off and listed on the stock market, with HSBC maintaining a controlling stake.
Last November, Michael Huang, the Ping An Asset Management chairman, waded into the debate by claiming the group would support HSBC if it pushed through a break-up.
Inside Hong Kong, where HSBC has a sizable army of armchair investors, there is also unrest about the lack of an explicit Asian presence.
To placate the pro-asian voices, Tucker and Quinn have in recent years sought to provide HSBC with a stronger Asian footprint. In 2021, Quinn unveiled plans to move some of his senior management to Hong Kong, including Nuno Matos and Barry O’byrne, who run HSBC’S main banking and commercial businesses. Meanwhile, for Quinn, the 62-year-old’s departure is likely to end a tiring cycle of trips to Asia and questions about how he will handle geopolitical pressures.
Perlie Mong, an analyst at KBW, claims this will be a relief to the veteran banker. “We never felt he looked completely comfortable in the role and suspect that Covid was a particularly brutal period running an international business like HSBC,” she said.
Quinn will now have time to watch his beloved Aston Villa, who drew 2-2 with Tucker’s Chelsea last week after they were denied a late penalty.
“Clearly Mark was unhappy because he almost won in the last minute,” said Quinn. “We were robbed,” Mr Tucker responded.
Will HSBC’S Asian shareholders be saying the same once Quinn’s successor is appointed?