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Finance

HSBC looks to outsiders for new CEO in bid to speed up change

Flint's China strategy derailed as Huawei CFO's arrest ensnares bank

HONG KONG -- HSBC, among the most insular banks in the world, is expected to appoint an outsider as its new CEO after the board removed John Flint and named Noel Quinn, head of global commercial banking, as interim leader.

"In the increasingly complex and challenging global environment in which the Bank operates, the Board believes a change is needed to meet the challenges that we face and to capture the very significant opportunities before us," said Mark Tucker, HSBC chairman, in a statement.

The news, coming after Flint had been in the job for only 18 months, triggered shock both within the bank and outside it, especially as it came on the back of earnings that analysts considered solid on all major business lines. Interim adjusted pretax profit rose 6.8% to $12.5 billion.

"It was not a delicate exit and came much earlier than anyone expected," said one former HSBC executive. The board's decision reflected a generalized discontent with the pace of change and Flint's style rather than any specific catalyst, senior HSBC people say.

"This has nothing to do with personalities, this is a unanimous decision of the nonexecutive directors," said Mark Tucker, who was brought in from regional insurer AIA as the bank's first outside chairman in 154 years.

HSBC announced on Aug. 5 the surprise departure of CEO John Flint after 18 months in the job.   © AP

The fact that Quinn was named only as interim CEO "surely means that he will not be anything more than temporary," says one former HSBC banker. "Otherwise, they would have given him the job. Nor is there any other obvious internal candidate."

The search for a replacement comes at a moment when there are few obvious external candidates. As a middle manager at Midland Bank, before it merged with HSBC, Quinn has little global experience in contrast to the elite international officers of HSBC and was not considered a highflier for most of his career.

The board could bring in someone who left the bank after it became obvious that Flint would be named CEO more than two years ago. This group includes Simon Cooper, now at Standard Chartered in Singapore, where he runs the Corporate, Commercial and Institutional Bank, and Mark McComb, one of the top executives at BlackRock Asset Management. Antonio Horta-Osorio, the Group CEO of Lloyds Banking Group and a former Goldman Sachs and Banco Santander executive, was also considered last time around. A longer shot is Alex Thursby who has worked at Standard Chartered, Australia & New Zealand Banking Group and National Bank of Abu Dhabi.

Flint -- who had spent his entire three-decade career with the London-headquartered lender -- succeeded Stuart Gulliver in early 2018 and had been groomed for years by the previous chief executive to be his successor.

Gulliver had spent most of his eight-year tenure dealing with the scandals that originated in businesses acquired before he became CEO and which resulted in heavy fines. For much of his time at the helm, the bank operated under a deferred prosecution agreement with the U.S. Department of Justice, which imposed strict conditions on HSBC after it admitted issues with compliance controls on transactions involving Mexican drug cartels.

When it came to considering Gulliver's successor, the HSBC board found itself caught between regulators who would have preferred to see an outsider take the helm from Gulliver and the wishes of the bank itself, already traumatized by the prospect of an outsider in the form of Tucker taking over as chairman.

"The regulators kept saying they wanted a robust and real worldwide search -- not just a nominal one," one director said at the time.

But in addition, the board always had its own reservations about Flint. He had spent virtually all his career in Gulliver's shadow and some directors wondered if he could make the transition to the top job, one director said at the time the selection process was under way.

While he had inherited a bank that had finally settled its regulatory issues, Flint took the helm of the bank at a time when many believed the unconventional monetary policies and low interest rates that had put pressure on margins were about to end. That proved not to be the case.

Moreover, for most of the time he was under consideration, Flint was also ambivalent. By his own admission, Flint was a cerebral introvert, to whom socializing with clients or even his own staff, did not come easily. He would prefer to read studies compiled for him on the challenges facing banking than host clients at the HSBC box at the races on Wednesday evenings. Flint had never even met Tucker until the board process began. Even after he became CEO, Flint could walk around Hong Kong anonymously in a way that would have been impossible for his predecessor.

As CEO, Flint had planned to continue Gulliver's focus on China and in particular the Pearl River Delta. But the plan encountered opposition both from within the board and the government of China, when it emerged that internal emails from HSBC had been the basis for the U.S. request to Canada to extradite Meng Wanzhou, the daughter of the founder of Huawei Technologies. Flint felt forced to apologize to the Chinese ambassador in London to keep the bank's strategy intact.

Now Flint's successor will be left to deal with the many challenges the bank faces -- everything from digital disruption to the drag of the North American operations, to an asset management business which is considered second rate. But at least analysts were upbeat at the quarterly performance. "Revenues were ahead of estimates and costs were lower, the preprovision operating profit beat was better than consensus," noted Anil Agarwal of Morgan Stanley in Hong Kong.

The statement said Flint has a 12-month notice period but had "agreed to remain available to HSBC" and that a specific departure date "is not yet known."

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