HSBC broke with tradition by choosing outsider Mark Tucker to replace Douglas Flint as chairman later this year, handing the AIA Group boss the task of selecting a new chief executive for Europe’s biggest bank in 2018.
A one-time professional footballer and insurance industry veteran who once led Britain’s Prudential, Tucker will take over as the bank’s first-ever external chairman on October 1.
HSBC shares were 0.9 per cent higher on Monday by 1150 GMT on news of Tucker’s appointment, as investors welcomed the choice of the Asia veteran as a signal it could intensify its shift towards the region and lower-risk income streams.
‘As a top five long term shareholder, we have been involved in the process and are pleased to see a highly regarded and fresh independent chair for HSBC,’ said Sacha Sadan, director of corporate governance at Legal & General Investment Management.
Flint’s departure will end one of the longest-serving management partnerships at a major global bank, as HSBC chief executive Stuart Gulliver is also due to leave in 2018.
‘The appointment of a safe pair of hands like Tucker potentially signals an increasing focus on steadier, annuity-style income streams where HSBC has a competitive advantage and which are also set to benefit as interest rates rise,’ Benjamin Quinlan of Hong Kong consultancy Quinlan & Associates said.
Identifying a successor for Gulliver will be one of the first tasks for Tucker, who will receive an annual fee of 1.5 million pounds in addition to standard benefits.
His basic salary at AIA in 2015 was $1.5 million, but short-term and long-term incentives could bring that total as high as $9.9 million, according to AIA’s latest annual report.
Gulliver, in common with many global bank CEOs, has not clearly nurtured an obvious successor-in-waiting within the lender’s senior management ranks, leaving the door open to a number of his lieutenants or an outside candidate.
Leading internal candidates include Europe chief Antonio Simoes and retail and wealth management head John Flint. Former Goldman Sachs banker Matthew Westerman is seen by some internally as a candidate, despite overseeing a relatively small part of HSBC’s investment bank.
Among external possibilities, Lloyds chief executive Antonio Horta-Osorio is frequently cited by investors.
‘We have been developing some strong internal candidates but you would always expect for a group of this size to benchmark them and look externally as well,’ Sam Laidlaw, an independent board member who also chairs HSBC’s pay committee, told Reuters.
Tucker’s main challenge will be to oversee a return to profit growth. HSBC’s overall return on equity slumped last year to less than one per cent, compared with 7.6 per cent the year before and far short of a long-term target of 10 per cent.
The bank only earns returns above that target in Asia among its geographical businesses, and only in retail banking and wealth management among its divisions.
Other obstacles include low demand for loans in its twin home markets of Britain and Hong Kong, reflected in a loan-to-deposit ratio of 67 per cent, below most of its peers.
HSBC also faces slowing growth in China, dampening hopes for an Asia pivot strategy announced last year.
While HSBC’s share price has barely risen during the tenure of Flint and Gulliver, the pair can point to successes, including the shrinking of the bank following a pre-2008 era of excessive empire-building and a clean-up of its culture.
The pair slashed over 43,000 jobs and sold assets worldwide as they attempted to shrink the group back to profitability amid a tough environment for global banks.
With more than $1.2 trillion (982.5 billion pounds) in customer deposits, HSBC has suffered more than most from low global interest rates which have made it difficult to invest deposits profitably.
HSBC’s full-year profit fell 62 per cent, far short of forecasts, last month as it took restructuring writedowns and flagged near-term brakes on revenue growth.
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