HSBC headquarter for APAC in Hong Kong. Photo: Sai-pok Mu
Hong Kong/Beijing — HSBC holding (NYSE:HSBC, HKSE:0005, LSE:HSBA) surprisingly announced the retirement of its 62-year-old CEO on the same day it released its Q1 results report. The market was caught off guard. The board has not yet decided on a successor, and Quinn will remain in office until his successor starts in the role. He has also agreed to remain available through to the end of his 12-month notice period, HSBC said.
The shocking departure
When his departure was announced, many expressed shock. At the Q3 financial results conference in October 2022, Quinn expressed his intention to continue working in the group for the long term. And now, his choice is family. According the a statement released by the bank, he wrote “After an intense five years, it is now the right time for me to get a better balance between my personal and business life. I intend to pursue a portfolio career going forward.”
According to Financial Times, there were internal reasons for Quinn’s sudden resignation. The report quoted three sources as saying that Qi Yaonian had no intention of leaving HSBC in early December last year, but after the Christmas holiday, he decided to retire from the position he had held for five years.
In addition to the need for the board to quickly start looking for a successor, his sudden departure was also an unexpected decision within HSBC. An HSBC banker said the news was still shocking to everyone; another employee said the decision was a surprise.
Quinn, 62, had planned to retire at 65. There are rumors that the term of HSBC Group Chairman, Mark Tucker, will expire in 2026, and his term is subject to the UK Corporate Governance Code (a part of UK company law with a set of principles of good corporate governance aimed at companies listed on the London Stock Exchange.)’s nine-year recommended term limit, Tucker’s term cannot be extended after 2026. HSBC seemed not to want the chairman and CEO to be vacant at the same time, Tucker hopes to oversee the CEO succession selection during his tenure. As the result, Quinn chose to leave.
According to WSJ article, the factors for leaving were family and improved performance. “He said he accelerated his retirement plans after thinking over his future this past Christmas season, and one factor that influenced his timing was the bank’s financial turnaround.”
Regarding the work expectations of the new CEO, Quinn said that he will not give his successor a to-do list. Instead, he will let them customize their to-do list and do the work they want to do. He smiled and thanked his predecessors for not trying to give him a to-do list, but they had given him a lot of support in the past five years.
His term as CEO and 37 years in HSBC
During his tenure as CEO, HSBC’s stock value increased by less than 30%, while Hong Kong’s Hang Seng Index fell by about 30% during the same period.HSBC focus on the core business service such as Asia which also includes strategic divestments in some region. HSBC has focused on streamlining operations, increasing efficiency, and optimizing its global business portfolio.
HSBC(HKSE:0005) stock price after Noel Quinn appointed CEO conpare with Hang Seng Index. Source: Reuters
Quinn joined HSBC (constituent companies) in 1987, and he participated in Strategy & Development; Head of Commercial Finance Europe and UK; Regional Head of Commercial Banking for APAC at the middle level of the group, until he became Chief Executive focus on Global Commercial Banking at the end of 2015. In 2020 In March, he was appointed group CEO.
Focus on core service and the sell of global asset
During his five-year CEO term, his strategy has mainly focused on the group’s core business which is Asia banking market, This also includes strategic divestments.
In 2021, HSBC sold its U.S. East Coast mass market and retail banking business, which contains 80 branches and approximately 800,000 customer accounts, to Citizens Bank, retaining only HSBC Premier. The sale of HSBC France completed in January 2024. In 2023, the entire business of HSBC Canada was sold to RBC. The transaction was completed on April 1 this year, and a special dividend of 21 cents was paid in Q1 2024. When HSBC sold the above three transactions, it was mentioned that its purpose was to allow the group to focus more on the Asian market.
On April 10 this year, HSBC announced that it would sell HSBC Argentina’s business to Galicia Group. Quinn explained the reason for the sale at a price well below the net asset value, saying that the Argentinian business had limited synergies with its global business and that in order to avoid currency exchange rate fluctuations, resources could be concentrated on the core business. At the same time, he also said that HSBC will remain committed to Mexico and the United States, focusing on global financial services and transaction banking.
One side is selling assets, and the other side is acquiring assets in core business areas. In August 2021, HSBC Singapore acquired the insurance business of AXA Singapore, and the transaction was completed in February 2022. HSBC aims to double the scale of its financial management business in Singapore by 2025 compared with 2022.
In March 2023, HSBC UK acquired the business of Silicon Valley Bank UK for £1. Four days ago, June 11, HSBC announced the completion of its acquisition of Citigroup (China)’s personal wealth management business. The deal was confirmed eight months ago in October 2023.
Comparative annual report data shows that HSBC’s customers in China will increase by more than 30% in 2023 compared with 2022, and the scale of assets under management will increase by approximately 50% compared with 2022. In Q1 this year, HSBC’s investment in Asia increased by 33%.
Diplomat or CEO?
In his CEO term, HSBC focus on the core business service such as Asia. Â He went on a trip to Beijing in 2023, with meeting with Vice President of China, chairman of China’s banking and insurance regulator and mayor of Beijing.
Many Chinese remain dissatisfied with HSBC’s stance on Huawei CFO Meng Wanzhou’s case against the United States. People believe that the company, whose largest single market is Hong Kong, betrayed Meng Wanzhou and was an accomplice of Washington.
In addition, the passage of the Hong Kong National Security Law has intensified the tension and estrangement between Beijing and London. As a London-based bank, its operations in China, Hong Kong and the United Kingdom will be more vulnerable to regulatory challenges. How to strike a balance is a compulsory question for CEOs.
The pressure from Pin An
Ping An Insurance Group (HKSE:2318, 601318.SH), the largest shareholder of HSBC holding, holds about 8% of HSBC shares. In 2022, some shareholders hoped to restructure HSBC, spin off the Asian region and give it a higher valuation. , although Ping An Group has publicly stated that it is the drafter of the proposal, Ping An Group publicly expressed its approval of the proposal.
In 2022, Huang Yong, chairman of Ping An Asset Management, criticized HSBC’s high costs and believed that HSBC needs to cut costs, increase revenue, and strengthen its focus on Asia. Ping An Asset Management is a subsidiary of Ping An Insurance, and Ping An Group holds shares in HSBC through Ping An Asset Management. He said “Just diving a few small markets or businesses will not fundamentally solve these issues,”
The proposal was rejected by shareholders at the 2023 AGM. At this year’s AGM, 16% of the votes cast by investors were against Qi Yaonian’s re-election as director. It is believed that Ping An Insurance voted against it. In a WSJ report in February 2023, it was mentioned that despite geopolitical challenges, HSBC management believed that Ping An’s actions were motivated by financial rather than political motives.
It was mentioned in the same report that the rift between HSBC and Ping An Insurance came from HSBC’s rejection of Ping An’s request for a seat on HSBC’s board in 2018.
In 2020, as the epidemic spread in the UK, the Bank of England pressured UK banks to suspend dividends to shareholders and reserve funds originally used to pay dividends to cover losses in the event of an economic collapse. This has a great impact on HSBC, a bank headquartered in the UK. HSBC will only pay dividends once in 2020.
This caused Ping An’s worries and dissatisfaction, as well as Ping An’s interest income of hundreds of millions. Therefore, Ping An’s restructuring hopes that HSBC will move its headquarters to Hong Kong or other places to reduce the pressure from London. Quinn said that the HSBC Group has no intention of moving its headquarters out of the UK and will continue to have its headquarters in the UK in the future.
HSBC held 10% of Ping An’s shares from 2002 to 2012. The latter officially appeared in the former’s announcement in 2017. On December 5 of that year, Ping An purchased 10 million shares of HSBC and held 5 %, trigger the public condition.
Who will be his successor
In addition to why he left, another question that many people are concerned about is: who will be his successor. On April 30, when HSBC announced his departure, HSBC also announced that it would begin a successor search and would consider both (HSBC) internal and external candidates, hoping to appoint a new chief executive in the second half of this year.
In the same WSJ article, Georges Elhedery was mentioned as a favorite to become CEO. This employee, who will have worked for HSBC for 20 years next year, will succeed the retired Ewen Stevenson as the CFO of HSBC Group in January 2023. In addition, the heads of three major HSBC businesses are also considered potential targets.
Although the board’s statement said it would search for candidates internally and externally, a Bloomberg report quoted people familiar with the matter as saying that HSBC is leaning towards promoting from within the HSBC Group. The above-mentioned Georges Elhedery and Nuno Matos (head of wealth management) are considered Leading candidate. Meanwhile, HSBC has hired an external recruitment firm to compare them with external candidates. But people familiar with the matter also said that the search for a successor has just begun and the board may still go in another direction.
It will be a smooth passing and HSBC will keep growing in next 6 to 12 month. However, we can pay attention to whether his successor can be as good at dancing as Quinn, able to handle geopolitics well and balance the relationship between London and Beijing.
Disclosure: I own less than 10 share long position in the shares of HSBC either through stock ownership, options, or other derivatives at the time I write this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.