Runners and riders in the HSBC Succession Champion Chase

COPYING AND DISTRIBUTING ARE PROHIBITED WITHOUT PERMISSION OF THE PUBLISHER: CHUNT@EUROMONEY.COM

By:
Clive Horwood
Published on:

Who’s leading the field? Who’s coming up on the rails? Which outsiders are worth ranking? The race is on for one of the biggest jobs in global banking… or is it?

HSBC Flint Gullivar-R-600
HSBC chairman Douglas Flint (left) and chief executive Stuart Gulliver

To anyone in Britain and Ireland who likes a flutter, the third week of March is always a bit of a landmark, its place on the calendar dominated by the Cheltenham Festival, which is pretty much the Grand Prix, Super Bowl and World Cup of National Hunt horseracing thrown into one.

But the many City stalwarts who like to back the ponies might keep a monkey or two back to place a bet on who is likely to be crowned the next CEO of HSBC. With news this week of Mark Tucker’s impending arrival as chairman, replacing Douglas Flint, HSBC also confirmed that Stuart Gulliver intends to step down as chief executive in 2018.

That is likely to spark an intriguing race for the succession, with numerous candidates jockeying for position – while the board and Tucker hope to avoid the messy, public wrangling that marked Gulliver’s own accession in 2010, alongside Flint.

We’ll break the field down into four groups:

1) At the head of the pack

Appointing Tucker – currently CEO of AIA, the Asian insurance group – is a big departure for HSBC, the first time the bank has looked to an outsider for one of the top two positions in the business. That makes most punters speculate that the new CEO will come through on the inside rail. So the first look at the form guide needs to focus on Gulliver’s direct reports.

Long-term favourite among many inside the HSBC stable is John Flint, currently head of retail banking and wealth management. He’s popular among colleagues as a safe and intelligent pair of hands, and has spent time in the wholesale banking division as well. That breadth of experience gives him a head start. But wealth and asset management have been two of the poor performers at HSBC for some time. Will that count Flint out of the race?

The young pretender has to be António Simões, chief executive of HSBC Bank plc, and the man in charge of UK and continental Europe operations. He has been a rising star of the bank for some time. But does he understand the breadth of HSBC’s business both geographically and in business lines sufficiently to run the whole group? And is HSBC ready to put someone who spent much of his career at consultant McKinsey on the front line?

2) Often overlooked but don’t rule them out

A proper read-through of HSBC’s 2016 annual results showed that even though the going for the past few years has been heavy, HSBC has made great strides forward in its Global Banking and Markets business. Who has been holding the reins as GB&M came through the field to overtake more garlanded investment banks? That would be GB&M CEO Samir Assaf. Shouldn’t the head of the best bit of HSBC be considered for the role? Many insiders say Assaf will likely call it a day at the same time as his close colleague Gulliver. But Assaf should not be written off lightly.

Also highly respected, and sure to be under consideration, is long-serving group finance director Iain Mackay. He took over the position from Douglas Flint in 2010, and is another urbane but charming Scot who knows HSBC’s business inside out and who is highly respected both internally and externally, by shareholders as well as regulators. But is someone who has spent his life managing the numbers the right pick to lead HSBC into a new era?

3) Coming up on the rails

The 2017/2018 Succession Race might come a little too early for some of the runners a little farther back in the pack. But with an outsider as chairman, perhaps it will be seen as a chance to skip a generation.

The name mentioned most often in this regard is Matthew Westerman, who joined HSBC a year ago from Goldman Sachs, where he’d been the bank’s corporate broker. He’s shaking up big parts of the investment banking operation as co-head of global banking and, although he reports to Assaf, is regarded as Gulliver’s hire. But is he too new to HSBC? And is he ready to make the jump to having responsibility for a trillion-dollar-plus balance sheet that covers everything from retail banking to trade finance?

Then there’s Gordon French, who runs GB&M in Asia-Pacific, the heartland of HSBC’s earning power. No one has done more to promote Gulliver’s policy of bringing the disparate parts of the bank together. No one is more integrally involved HSBC’s pivot to Asia. But he’s never had a role with global responsibility, so again the CEO job could be too much of a leap.

Other names discussed in the parade ring include Marc Moses, the super-sharp chief risk officer; and Noel Quinn, global head of one of HSBC’s crown jewels, the commercial banking division, although he’s only a recent appointment to the role after predecessor Simon Cooper – once seen as a potential heir-apparent – jumped ship to Standard Chartered.

4) The real outsiders

If – and it’s a big if – Tucker went outside HSBC internal ranks for its next CEO, there would be no shortage of senior bankers interested in the job.

There’s been speculation for some time that HSBC could be the next port of call for Lloyds Banking Group CEO António Horta-Osório. With Lloyds nearly sold out of its UK government ownership, producing double-digit returns on equity, and with limited scope to grow in its core market, would AHO be ready for a new challenge at a bank whose global scale would match his own ambitions, and his ego? His reputation for getting costs under control would be a big plus for HSBC, which even the talented insider Gulliver has struggled to achieve. But is conservative HSBC really ready for the José Mourinho of banking?

Could there be a return of a prodigal son? Mark McCombe remains highly thought-of within HSBC, where he spent the majority of his career, and was CEO of its Hong Kong business. McCombe left for the world’s biggest asset manager, BlackRock, a few years ago and now runs its business in the Americas. But he’s seen as a rising star at BlackRock, and a potential successor to CEO Larry Fink, so he might be hard to tempt away.

A smart each-way bet could be Stephen Bird, CEO of global consumer banking at Citi. Previously CEO of Citigroup in Asia-Pacific, he knows HSBC’s most important Asian markets well, and has managed a diversified business similar to HSBC’s before, albeit on a regional level. He’s Scottish, which has historically gone down well at HSBC. While at Citi in Asia, he negotiated a successful life insurance joint venture with AIA, whose CEO at the time was of course… Tucker. The two are known to get along very well. And technophile Bird could help drag HSBC more quickly into the digital age, if the ties of loyalty to Citi could be broken.

One other possibility…

At the moment the race is anyone’s. Gulliver has been such a strong CEO that there is no obvious successor. Which leaves one other possibility. Some observers – both internal and external – suspect Gulliver ‘kitchen-sinked’ the group 2016 results, taking the chance to use goodwill write-downs in problem areas such as private banking in the knowledge that 2017 is set to be a good year.

So what happens if, come February 2018, Gulliver delivers an outstanding set of results? Would he choose to go out on a high? Or would the clamour for him to be allowed to continue his good work give Tucker no option other than to ask him to stay a little longer?

Let the jockeying commence (as if it hasn’t already).