HSBC axes chief in shock move to speed up changes
Differences with the new chair arose over John Flint’s softer approach to cutting expenses, says source
Hong Kong/London — HSBC ousted CEO John Flint after just 18 months in that role, in a surprise move that the lender’s chair said was necessary to accelerate progress of its strategic priorities.
Flint’s exit was disclosed by HSBC early on Monday along with its half-yearly results which had been scheduled for release later in the day. A person familiar with the matter said his exit was a result of differences over the execution of his strategy.
The departure comes as Europe’s biggest bank is grappling with headwinds, including an escalation of a trade war between China and the US, an easing monetary policy cycle, unrest in the key Hong Kong market and uncertainty about Brexit.
Flint ran HSBC’s retail and wealth management business before taking over as CEO in February 2018. His appointment was the first major decision taken by the bank’s first externally appointed chair, Mark Tucker, who came on board in late 2017.
Tucker told Reuters a change of CEO was needed to accelerate progress in HSBC’s major strategic priorities, such as the turnaround of its US business. “It’s the right time for change, and doing it clearly and decisively from a position of strength is very important,” Tucker said, adding that the search for a new CEO could take up to a year.
HSBC’s Hong Kong shares fell 1.4% in afternoon trade, while the broader market was down 2.7%.
The stock dropped even as the lender posted a 16% rise in half-yearly profit and unveiled a buyback of up to $1bn, defying some analysts’ expectations it might pause a strategy of returning extra capital to investors.
London-headquartered HSBC, which makes more than 80% of its profit in Asia, said that global commercial banking unit head Noel Quinn will be interim CEO. The board will consider internal and external candidates for the new CEO, it said.
A person familiar with the matter said Flint’s departure was a result of differences of opinion between Flint and Tucker over the pace and results of executing HSBC’s strategy. The differences arose from Flint’s softer approach to cutting expenses and setting revenue targets for senior managers to boost profit growth, said the person, who declined to be named due to the sensitivity of the issue.
An HSBC spokesperson in Hong Kong declined to comment.
One of the main differences was related to efforts to turn around its underperforming US business, the person said. That unit posted a 1.5% drop in profit in the January-June period compared with the half year to December 2018.
HSBC hired Citigroup veteran Michael Roberts in July to head its US business, in a renewed effort to bring in external help to turn around the struggling unit.
The bank said on Monday that given the outlook for interest rates and revenue headwinds in its global banking and markets and retail banking and wealth management businesses, it did not expect to achieve the targeted 6% return on tangible equity by 2020 in the US business. That US goal is still below the overall group aim of getting to more than 11% return on equity by 2020.
The US business is not “getting the proper returns” that the bank would like to see, CFO Ewen Stevenson said, adding the unit has also been hit by the change in the monetary policy cycle.
Daniel Tabbush, an independent banking analyst who publishes his research on SmartKarma, said: “I can only speculate that he [Flint] was underachieving on numbers. What may also be the case, but there is no way to know for sure, is that he may have been trying to push through real change and this was being frowned upon. On the surface, it does not look good and especially for so short a tenure as CEO.”
When he was picked as CEO, Flint was viewed by HSBC executives as a safe option as he had been with the bank since 1989 and worked across most of its businesses. He spent the first 14 years of his HSBC career in Asia.
Outlining his strategy at the helm of the bank in June last year, Flint set out plans to invest $15bn-$17bn in the next three years, including in technology and China.
HSBC’s pretax profit for the first six months of 2019 rose to $12.41bn from $10.71bn in the same period a year earlier, helped by a surge in retail banking and Asia revenues.
The bank flagged the risk to its business from the US-China trade war and the change in the interest rate cycle.
The tit-for-tat tariff war between the world’s two largest economies has taken its toll on trade-focused banks like HSBC and rival Standard Chartered, which last week warned of an impact on its business customers from the escalating tensions.
“The outlook has changed. Interest rates in the US dollar bloc are now expected to fall rather than rise, and geopolitical issues could impact a significant number of our major markets,” HSBC said in its earnings statement.
The bank was “managing operating expenses and investment spending in line with the increased risks to revenue”, it said.
Prior to the latest buyback announcement, HSBC had purchased more than $6bn of its own shares since 2016.
Analysts had been watching closely to see whether the bank would announce a fresh buyback, as a failure to do so would have been read as a sign of mounting caution by HSBC’s management.
HSBC posted its results on a day when Hong Kong, its second home, was plunged into fresh chaos due to a general strike, as protests against an extradition bill evolved into a broader backlash against the government.
Tucker played down the impact of that on the bank’s business and said the bank remained confident about the future of the Asian financial centre.