LONDON (BLOOMBERG) - HSBC Holdings abruptly ousted its chief executive officer after just 18 months, citing an “increasingly complex” environment, and announced a new round of job cuts.
The exit of John Flint, a 51-year-old who started at HSBC as a trainee, highlights tension with Chairman Mark Tucker, known to be a hard-charging executive who was the first outsider to fill the post in the bank’s 154-year history.
They clashed over style, with Flint focused on cultural issues at the firm and Tucker taking a more data-driven approach, people familiar with the matter said. Tucker grew impatient with the execution of strategic priorities, such as the Flint’s slow progress with boosting the US business, they said.
Tucker was also increasingly at odds with Flint over the CEO’s focus on expanding in China, according to the people. HSBC was in an uncomfortable spot over Washington’s legal and political tussle with Chinese technology company Huawei Technologies, a major client of the bank. US prosecutors drew on HSBC’s relationship with Huawei to build its case against an executive at the telecom company, the Financial Times reported last month.
Tucker denied any personality clash with Flint or disagreement over job cuts, adding on a media call that there had been “absolutely” no pressure from China over the CEO’s role.
Noel Quinn, head of global commercial banking, will assume the CEO post on an interim basis, HSBC said along with its first-half earnings. The bank has never installed an outsider as CEO, and other internal candidates could include chief financial officer Ewen Stevenson and Antonio Simoes, head of global private banking.
During Flint’s short tenure, the 235,000-employee bank, Europe’s biggest by market value, has grappled with a declining stock price, a high-profile sexual harassment case at its investment bank and a failure to hit cost targets, leading to a new program to eliminate jobs and questions from auditors about how these goals would be met.
Shares in HSBC fell as much as 2.1 per cent before recovering to trade 1.8 per cent lower at 1:04 p.m. in London.
HSBC, which makes most of its money oiling the wheels of trade between East and West, has also faced repeated questions about why a business heavily skewed toward some of the world’s fastest-growing economies can’t make better returns.
One of Flint’s key promises was that revenue gains would outpace cost increases, a trend the bank refers to as positive jaws. He failed to achieve that in his first year at the helm, though the bank said Monday that first-half adjusted jaws was a positive 4.5 per cent.
HSBC plans to axe more than 4,000 posts, CFO Stevenson said in a call with analysts, warning that senior executives will be a focus of the cutbacks. Flint’s departure follows exits last month of US head Patrick Burke and Greg Pierce, who ran the U.S. markets business. The lender also said Monday it didn’t expect to achieve its targeted 6 per cent return on tangible equity in the US by 2020.
HSBC expects severance costs to range from US$650 million to US$700 million in 2019, with annualized savings of a similar amount, according to an investor presentation.
“Our sense is the climate is getting increasingly complex, increasingly challenging, and that we both agree a change is needed to really make the most of the opportunities ahead of us,” Tucker said in an interview on Monday.
For his part, Tucker, the former CEO of insurer Prudential, rejected talk that he assume the post at HSBC. “Under no circumstances” would he take the job, he said in a call.
The CEO hiring process would take six-to-12 months, and consider both internal and external candidates, he said.
HSBC faces a dilemma between the need to invest in its global businesses and the pressure to show it has costs under control. The bank had budgeted investments of US$5 billion this year, but it’s been measured in laying that out, spending just US$1 billion in the first three months.
Earlier, the bank also said as part of its earnings that it would shortly begin a buyback of up to US$1 billion.
Flint’s short tenure as CEO is in contrast to his predecessor Stuart Gulliver, who ran HSBC between 2011 and 2018, and grappled with the impact on the bank of the global financial crisis. During Gulliver’s years in charge, the London-based lender faced pressure on its earnings from new regulations and low interest rates, and had to navigate misconduct scandals, which revealed widespread compliance failures.