HSBC Braces for Massive Overhaul as Quinn’s Future in Balance

Source
Noel Quinn
Photographer: Takaaki Iwabu/Bloomberg

From its headquarters near the Thames to its Asian hub by the South China Sea, HSBC Holdings Plc is abuzz.

With days to go before the bank unveils a restructuring, trading desks and back offices are bracing for scenarios that could see the announcement of another reshuffle of senior management, a surprise new chief executive, withdrawals from businesses and job reductions across the globe. It will be the London-based lender’s third major overhaul in a decade, and it will be announced Tuesday.

“The current strategy is in no man’s land,” said Lutz Roehmeyer, chief investment officer at Capitulum Asset Management in Berlin, which holds HSBC shares and has been cutting its exposure. “HSBC should stop being so prudent, take risk and expand -- or otherwise shrink, and shrink fast.”

HSBC Overhauls European Management Ahead of Major Review

HSBC’s biggest market -- Hong Kong -- is also suffering through serial crises: anti-government protests in the former British colony, followed by coronavirus on the Chinese mainland. Then there’s the record low interest rates in many countries, which are hampering lenders around the globe.

Measures announced Tuesday are likely to include billion-dollar writedowns, cuts at trading desks, and a reduction in exposure to countries ranging from Turkey and Greece to Oman, people familiar with the matter say. Efforts to sell HSBC’s French retail business are progressing, and an overhaul of the underperforming U.S. business is underway, the people said.

Since he was tapped to succeed the ousted John Flint last year, interim head Noel Quinn is battling fires on many fronts, including uncertainty about his own future. Last fall, Quinn told staff he was “certainly not intending, and was not asked, to be a caretaker.” Some analysts had expected he would have been confirmed as the full-time chief by now.

Read More: Caretaker CEO Sets Sights on Getting the Job for Good

“There may be controversial elements within the strategy that Quinn will outline on Tuesday, and the board may want to gauge the market reaction before anointing him successor,” said John Cronin, a banks analyst at Goodbody in Dublin. “Of course, it could also be the case that other CEO candidates could be in the mix. The bottom line is that the odds on Quinn getting the top job have reduced.”

Most non-Quinn speculation so far has focused on Stephen Bird, Citigroup Inc.’s former top executive in Asia. HSBC is seriously considering external candidates, one of the people said. HSBC declined to comment on any of the reporting of this story.

Hands-on Chairman Mark Tucker, who has said the hunt for a CEO could take as long as a year, wants to appoint someone with a broad mix of experience, including a background in asset management and investment banking, Bloomberg has reported.

As part of a broader reshuffle, HSBC also picked executive Andrew Fullam to carry out a new strategy in its underperforming U.S. business, according to a memo this month. Fullam, who joined HSBC 15 years ago, took on the newly created role of U.S. head of strategic execution. Europe’s biggest bank by market value is also setting up a “central office” in the U.S. to implement its new goals, said the memo dated Feb. 10.

The North American unit has been a source of problems for several years. Its profit has declined for the past three quarters, and Quinn said in October that in several markets, including the U.S., performance of some businesses was “not acceptable.”

HSBC is forecast to report an adjusted pretax profit of $21.8 billion for the full year, according to the company-compiled estimate of 18 analysts. Its shares are little changed over the past 6 months, compared with a broad advance by most other European lenders.

“Investors have highlighted the risk of high, upfront restructuring costs the group might incur while undertaking a new strategic plan,” said Goldman Sachs Group Inc. analysts in a note this month. “This could adversely impact capital levels and make buybacks less likely.”

— With assistance by William Canny, Viren Vaghela, and Donal Griffin