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A shake-up at HSBC as ‘world’s local bank’ plots overhaul

Simon English
·4-min read
 (Shutterstock / r.nagy)
(Shutterstock / r.nagy)

For years HSBC has marketed itself as the world’s local bank. In airports across the globe it beamed the message: if you are here, so are we.

The idea that it was everywhere was supposed to be good from a business point of view since it ought to lower costs of capital.

From a marketing point of view, the globe-trotting businessman would be reassured that his bank looked the same in Paris as it did in Phuket.

The tourist might feel the same.

It didn’t always work and there were times when HSBC’s size was plainly a hindrance, most obviously when it had to pay a near $2 billion fine in 2012 for money-laundering the earnings of Mexican and Columbian cocaine gangs.

No-one was talking about its lower cost of capital then. At that point HSBC looked unwieldy, perhaps unmanageable.

Cracks in the idea of the world’s local bank have been appearing ever since.

London is extremely important.

WATCH: HSBC bets on Asian wealth as profits tumble

Today HSBC confirmed well-flagged plans to step up its Asian presence and ditch its US retail banking arm. Sale talks are ongoing.

There was some good news for London, with CEO Noel Quinn insisting the City remains central to his plans. The Canary Wharf tower houses up to 10,000 staff and will be mostly full again when conditions allow.

The lease on the Canary skyscraper lasts until 2027

“London is extremely important,” he told the Standard. “Our job is to connect London to the rest of the world.”

Getty Images
Getty Images

Quinn is a relative newcomer to the role, along with the Kiwi finance chief Ewen Stevenson, who arrived having helped slim down the bloated car crash that was Royal Bank of Scotland, now renamed NatWest.

Chairman Mark Tucker is regarded as a tough cookie, and will have to be.

Tensions between Hong Kong and China mean that Tucker’s job is presently “80% politics and 20% business”, one source told the Financial Times.

All three executives seem more open to change, more willing to admit errors, than the previous management.

One tale from the City has Stevenson in his first days at HSBC taking a note of just how many people were in his meetings, and just how few of them actually contributed anything meaningful.

Stevenson has lately been granted extra responsibility to drive the change the bank needs. He got a £147,000 pay rise for that, taking his base salary before bonuses to £1.1 million, but that rise will go to charity in the first year, something it is hard to imagine the old guard embracing.

No-one says HSBC isn’t bureaucratic, partly due to its size and partly due to its history.

The Hong Kong Shanghai Banking Corporation was founded in 1865, moving its base to London in 1993 when it bought the Midland Bank.

Insiders then said Midland stood for “Much Is Discussed, Little Agreed and Nothing Done”. Insiders now say working for HSBC is like working for the Civil Service.

It’s a good employer, but dynamism may not be its most obvious feature.

Today’s results saw HSBC resume paying a dividend to investors, the small amount regulators would allow, as profits plunged 35% to $8.8 billion.

The overwhelming majority of those profits were made in Asia.

The US arm lost money, bundles of it. The European arm was even worse, down more than $4 billion.

Which explains why the bank plans to invest $6 billion to expand in Hong Kong, China and Singapore. The French consumer banking business, that’s on the block too.

Quinn, who insists he will remain London based, notes that “the heart” of the business will be in Asia.

There will be 35,000 job cuts in total across Europe and the US, while travel and office costs are slashed.

Meanwhile, the HSBC share price remains in the doldrums. It was around 790p in January 2018 – today it is 428p, at which price the bank is still valued at £87 billion.

For the shares to re-rate, Quinn, Tucker and co need their plans to bear fruit.

So far, the City is underwhelmed by what it is hearing, while relieved that the focus is on costs and Asian growth.

“It was a tough year,” said Quinn. There is much to be done.

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