Thursday, September 24, 2020

HSBC chairman faces mounting pressure after Mustier Rebuff

Feb 25. 2020
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By Syndication Washington Post, Bloomberg · Harry Wilson, Sonia Sirletti · BUSINESS, US-GLOBAL-MARKETS 

HSBC Holdings Chairman Mark Tucker's drive to reboot the giant lender needs a reboot.The decision by UniCredit's Jean Pierre Mustier to drop out of consideration for HSBC's top job marks the second high-profile setback in less than a week for Tucker, the first outsider ever hired as the chairman of the 165-year-old institution. The bank's shares have tumbled 6.9% since a Feb. 18 strategy overhaul fell flat and on Monday reached their lowest in more than three years.

Tucker is now conducting the search for a new CEO in the spotlight -- his first pick lasted just 18 months -- with shareholders demanding answers and some insiders questioning the board. Mustier's exit further complicates an already drawn-out process and deepens the uncertainty around interim CEO Noel Quinn and the plan he announced last week to cut 35,000 jobs.

"It's not a good time to join the bank, especially for an external candidate," Ronald Wan, CEO at Partners Capital International in Hong Kong, said by phone. "HSBC is going through a challenging operating environment -- economic slowdown, the coronavirus outbreak, Brexit -- and the bank's new strategy will all make the CEO's job difficult."

Mustier, who led a turnaround at Milan-based UniCredit in the past four years, plans to stay and is committed to the new strategic plan announced in December, according to a UniCredit statement on Monday. The Frenchman informed Tucker of his decision to withdraw by phone on Sunday, a person with knowledge of the matter said.

HSBC shares fell 2% in London on Monday, sliding to 550.80 pence, the lowest close since August 2016.

The Mustier interlude highlights the churn at the top of European banking. UBS Group on Wednesday picked ING Groep CEO Ralph Hamers to take over from Sergio Ermotti. Rival Credit Suisse Group replaced Tidjane Thiam with Thomas Gottstein earlier this month, and Marco Morelli said he won't seek another term as chief of Banca Monte dei Paschi di Siena SpA.

A recent history of troubles at HSBC may make it even tougher to recruit an external candidate. For example, in the U.S., Wells Fargo, another lender in need of a revamp, took six months to attract an outsider as CEO in the wake of scandals that claimed two chiefs in three years.

If Tucker "doesn't want to appoint Noel Quinn to the position on a permanent basis, then he needs to convince the market that he has some other credible options," John Cronin, an analyst at the Dublin-based Goodbody stockbrokers, wrote in a note. "Or maybe he will just move to appoint Quinn without delay -- perhaps within the next two weeks. Our bet is on the latter."

Mustier had emerged as a key external contender for the role, pitting him against HSBC lifer Quinn. After being approached by HSBC, he engaged in informal talks before deciding that the timing wasn't right to move because of UniCredit's new strategic plan and brewing Coronavirus worries in Italy, according to a person close to his thinking. He informed UniCredit board members of the approach over the weekend before his call to Tucker.

After John Flint's surprise ouster in August, HSBC said that it could take six to twelve months to find a permanent successor.

A CEO search extending into its seventh month and the appearance that Quinn would be a second choice had some clients and staff worried about the potential outcome, according to a person familiar with the matter.

"The bank's situation remains tough," said Alex Wong, Hong-Kong based director of asset management at Ample Capital Ltd. "It's not easy to ask another CEO to join you when they are already performing in their current position."

At UniCredit, Mustier has been cutting costs and accelerating the cleanup of the balance sheet, focusing on simplifying the bank's structure and improving the way it allocates capital. Since 2014, UniCredit has cut about 20,000 jobs, 14,000 of which took place during Mustier's tenure. He also oversaw a 13 billion-euro ($14.1 billion) rights offer in 2017 to help pay for a clean-up of bad loans. Under the new strategic plan he expects to cut 8,000 jobs in total.

That track record would have been appealing at HSBC, which is going through the third strategic overhaul in a decade. Tucker, who ejected Flint last year after he failed to revive growth at the Asia-focused lender, has struggled to explain why a bank with such a stronghold in some of the world's fastest-growing economies has been unable to produce a better return.

 

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