HONG KONG • HSBC Holdings named insurance executive Mark Tucker to succeed Mr Douglas Flint as chairman, enlisting an outsider to oversee Europe's biggest bank as it overhauls management.
Mr Tucker, 59, chief executive officer of AIA Group, will take the post on Oct 1, the bank said in a statement yesterday. AIA Regional chief Ng Keng Hooi will immediately become CEO-designate and formally succeed Mr Tucker on Sept 1.
The news saw HSBC shares jump 2.3 per cent in Hong Kong at noon yesterday, the biggest intra-day gain since Dec 8, extending its advance this year to 3.5 per cent. AIA shares dropped 3.3 per cent in Hong Kong as investors digested the news.
In hiring Mr Tucker, HSBC has gone outside its fold for the first time in its 152-year history, and this could be explained by AIA's profitability. Its stock has more than doubled since American International Group spun it off in 2010, a few months after Mr Tucker took over the reins.
"Under his leadership, AIA has achieved impressive growth via steady top-line expansion, ongoing product mix improvement, expansion in distribution channels, accretive acquisitions, as well as expansion into new markets," analysts at Citi wrote yesterday.
Over the past seven years, the company has expanded rapidly into key growth markets, including India and China, leading to a quadrupling in the value of new business at AIA to US$2.8 billion (S$4 billion) between 2010 and November last year, according to the company.
Although AIA and HSBC share an Asia focus, earnings at AIA surged while London-headquartered HSBC grappled with low interest rates and legal wranglings, and has seen its return on equity fall to well below banks' 10 per cent theoretical cost of capital.
The bank, which has about 235,000 employees in 70 countries, is restructuring to adapt to tougher regulations and a law requiring the separation of its retail operations from the investment bank in Britain, amid a legacy of failed compliance and misconduct.
HSBC is still under the watch of the US Justice Department after helping South American drug cartels launder money, and faces moderating economic growth in China and the prospect of a post-Brexit slowdown in Britain, its two most important regions. With Mr Tucker at the helm, there is an opportunity for HSBC to tighten its Asia focus, something a London domicile does not quite cut.
Asia has become an ever more important region for HSBC over the years, accounting for 74 per cent of the bank's adjusted pre-tax profit last year versus 65 per cent in 2014, according to Bloomberg Intelligence analyst Francis Chan.
Hong Kong alone is a huge revenue source for both firms, comprising 35 per cent of AIA's income last year and 28 per cent for HSBC.
AIA's Mr Ng, 62, will have big shoes to fill as the group faces the prospect of slower growth and digital disruption in some of its key Asian markets, industry insiders and analysts said yesterday. One of the world's largest life insurers, AIA also has to navigate through a regulatory crackdown in China.
"Clearly, Tucker has been a driving force at AIA and anybody taking on that CEO role is stepping into a big legacy," said Mr Keith Pogson, senior partner of Apac financial services at EY."There will now have to be a period of thoughtful reflection as to how AIA moves forward, post-Tucker."
Mr Ng joined AIA in 2010, before which he was group CEO of Singapore-based Great Eastern Holdings and served a 20-year stint at Prudential. AIA's other major markets include Singapore and Malaysia - the South-east Asian countries that have become a battleground for foreign insurers attracted by the region's lower insurance penetration levels.