Is Flint the man for HSBC?

COPYING AND DISTRIBUTING ARE PROHIBITED WITHOUT PERMISSION OF THE PUBLISHER: SContreras@Euromoney.com

By:
Clive Horwood
Published on:

HSBC’s next chairman will tell you everything you need to know about the bank’s future.

 
Stephen Green
The announcement that Bob Diamond will take over as chief executive of Barclays – probably the least surprising piece of news of the past three years to many in the banking industry – dominated the headlines in the UK today, even in the mainstream media.

But there was a much more intriguing announcement today: the news that Stephen Green is stepping down as executive chairman of HSBC from the start of next year.

Green’s departure to pastures new is no immediate surprise. His future role as a minister in the UK’s coalition government makes sense as well. Green has always been careful to communicate his strongly-held convictions that capitalism must have a caring side. This would no doubt appeal to bank-bashing business secretary Vince Cable.

The breaking of the story this morning seemed to catch HSBC on the hop. The bank issued its statement at around 13.00BST today. Green was leaving, as the wires had suggested, but there was no information about how he would be replaced. It was, perhaps, a painful lesson that Whitehall is much more leak-ridden than Wall Street or Canary Wharf.

Stuart Gulliver 
Stuart Gulliver
But here’s the issue that most people are missing: how Green is replaced, and by whom, will inform the future direction of HSBC in a way that few successions have in recent times.

Why? You only have to look back to the comments of investment bank chief Stuart Gulliver last week for the answer. He made it clear that HSBC was not tied to its UK regulatory base. The bank did not want to quit its home in London, but it might be forced to if the Cable & Co introduced measures that harmed it.

 Mike Geoghegan
 Mike Geoghegan
Mike Geoghegan, HSBC’s chief executive, has already famously relocated to Hong Kong. The traditional HSBC route from here would be that Geoghegan would step up to chairman, and Gulliver would move on to the CEO role.

That may not happen, at least in the short term. Those who know Geoghegan well say he is far from done as group chief executive. He has many ambitions left. The role of chairman is vital, but Geoghegan will prefer to continue to operate within the markets that he loves and understands.

But it gets more complicated. It’s little known that when Geoghegan moved to Hong Kong, the FSA made it clear to HSBC that, if they wished to continue to be regulated in the UK, then they would need to commit to keep an executive chairman in London.

Could Green’s departure, in light of Gulliver’s recent comments, herald the end of that arrangement? HSBC has also felt pressure from shareholders to end its policy of having an executive chairman. Bank insiders have long said that the obvious candidate on the board, should a non-exec chair role become available, is former Goldman Sachs president and Sinophile John Thornton. He would certainly fit the bill for HSBC’s eastward-looking ambitions. But would he relocate to London and would he want a full-time role?

Finding an executive chairman to work in London, in parallel with Geoghegan but 6,000 miles distant, may prove difficult. HSBC would not want to appoint from outside. Gulliver will wait his turn to become chief executive.

 Douglas Flint
 Douglas Flint
There’s one obvious internal candidate – CFO Douglas Flint. The Scot was in the running to become chief executive four years ago, but in the end the board plumped for Geoghegan. Putting Flint in a position that, in the strict scheme of things, ranks above Geoghegan, may cause ructions. But they have worked together for many years. Flint earned immense respect for his management of HSBC’s finances through the crisis. Shareholders know, like and respect him. So do regulators, a key part of the chairman’s role.

Flint, Thornton or someone else – the decision, promised by the end of the year but certain to come before that -- will tell us a lot more about the future of HSBC than any press release.








 

Is Winters next in line for great HSBC reshuffle? 
Friday, September 24, 2010