Quinn may just be stuck with the job.HSBC used automated processes to monitor hundreds of millions of transactions a month to identify possible financial crime. Outside CEOs won’t be clamoring to steer this ship. Ultimately, HSBC’s biggest risk may be that Quinn’s cuts cause the lender to double down on greater China just as growth in this part of Asia is uncertain. HSBC shares closed 2.8% lower in Hong Kong after the earnings, the biggest decline in more than a year. ![]() Even its new goal of 10%-12% by 2022 looks unambitious beside the 18% return of JPMorgan Chase & Co. That’s much lower than the more than 11% target it abandoned in October. While 2019 adjusted pretax profit of $22.2 billion beat analysts’ estimates, HSBC’s fourth-quarter return on tangible equity was a mere 8.4%. That means it’s going to take a long time before HSBC achieves the returns Tucker seeks. And disruption to supply chains from the virus outbreak may lead to more credit losses, the bank has said. prosecutors with information that led to the arrest of Huawei Technologies Co.’s chief financial officer in late 2018. prepare to launch this year. Hong Kong’s dominant bank has also had to navigate political minefields, including being the target of the public ire last year after it closed an account linked to pro-democracy protesters.Ĭhina, meanwhile, remains a challenge. HSBC is still struggling to extricate itself from Beijing’s bad books for providing U.S. The city is going to become an even more glaring presence in its books.īesides an economy in recession, competition is getting tougher for HSBC in the city, as online lenders backed by Tencent Holdings Ltd. The restructuring makes the bank even more hostage to the fortunes of Hong Kong and mainland China, two economies struggling with slowing growth aggravated by the coronavirus outbreak. Hong Kong was already the source of 90% of HSBC’s profit in the third quarter. Still, the overhaul may end up exacerbating some of the vulnerabilities they seek to address. They’re also an answer to those who, like this writer, have criticized the bank for being overly timid in the past. The job cuts are equal to about 15% of the workforce. No one could accuse HSBC of sparing the knife this time. HSBC will shift resources to higher-returning markets, while squeezing the cost base and exiting some business lines. “The current strategy is in no man’s land,” as one investor told Bloomberg News pre-earnings. “Parts of our business are not delivering acceptable returns,” Quinn said in Tuesday’s statement. HSBC might argue that waiting wasn’t an option after years of sub-par performance. That may narrow the options for HSBC Chairman Mark Tucker. Stephen Bird, Citigroup Inc.’s former top executive in Asia and the leading external candidate for the job, already has ruled himself out, the U.K.’s Sunday Times reported last weekend, citing unidentified sources. This reshaping will have Quinn’s fingerprints all over it. But the biggest decisions have already been made. Second, going ahead with the revamp may impede the search for a replacement.Īny chief executive worth his or her salt will expect to put a personal stamp on the company. At the very least, the delay signals that the board has harbored doubts about his suitability. First, it undercuts the authority and investor confidence that Quinn might otherwise be expected to enjoy, should he eventually be appointed. Quinn was left to present the plan even as HSBC declined to confirm him in the job. ![]() All this will be overseen by Interim Chief Executive Officer Noel Quinn pending the appointment of a permanent successor to John Flint, who was ousted last August. The London-based lender will cut as many as 35,000 jobs, reduce gross assets by more than $100 billion by 2022, shave annual costs by $4.5 billion and slash the size of its investment bank in Europe and U.S. in the biggest raft of changes for years. For investors, the strategic muddle of this bizarre situation should be at least as troubling as the stinging cuts, $7.3 billion of charges and suspension of buybacks that the bank announced with its earnings Tuesday. HSBC Holdings Plc is embarking on a radical overhaul while it continues the hunt for a permanent chief executive.
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