February 6, 2020 / 11:21 AM / 19 days ago

Breakingviews - HSBC CEO limbo has a thin silver lining

The HSBC bank logo is seen at their offices in the Canary Wharf financial district in London, Britain, March 3, 2016.

LONDON (Reuters Breakingviews) - Noel Quinn is in the throes of banking’s most high-profile and public job interview. The interim HSBC boss will unveil a big strategic overhaul before the $150 billion lender names a permanent chief executive, the Financial Times reported late on Wednesday. While that’s messy, there’s a crumb of comfort for investors.

Quinn was named the temporary replacement for former CEO John Flint, who left in August 2019 after only 18 months partly because of a poor relationship with Chairman Mark Tucker. That experience may explain why the board is thinking so long and hard before deciding on a permanent replacement. In the meantime, Quinn is forging ahead with a new strategy for the bank, which he will unveil on Feb. 18, alongside full-year results.

The sequencing is odd. If Quinn is good enough to decide HSBC’s next chapter, he should get the job. If he’s not up to it, he’s not the right man to oversee such an important revamp. Tucker might respond with the “better safe than sorry” defence. But that excuse could backfire if he eventually opts for someone else - say, Citigroup’s former head of consumer banking Stephen Bird. A new broom would want to put their own stamp on the lender’s strategy.

The job limbo may, however, benefit shareholders in the short term. Given Quinn is still effectively auditioning to be CEO, he has a strong incentive to show he’s the one to deliver the deep cost cuts needed in the U.S. business and to the London-based investment bank. Continuity isn’t an option given HSBC’s one-year total shareholder return of 6%, which is puny compared with Standard Chartered’s 10% and Citi’s 27%, according to Refinitiv data. North America and Europe together accounted for almost half of risk-weighted assets but around one-tenth of pre-tax profit in the first nine months of 2019. Quinn may be in limbo but has an obvious path out of purgatory.

Breakingviews

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