HSBC takes surprise succession move as forecast reaches equities

  • Banks ousts CFO Ewen Stevenson in surprise move
  • Move is about succession planning, says CEO
  • The new CFO had just returned from a sabbatical
  • Q3 profit fell 42%, hit by asset sales and rising loan losses
  • Stocks slide on murky outlook, surprise CFO change

LONDON/SINGAPORE, October 25 (Reuters) – HSBC (HSBA.L) named Georges Elhedery as chief financial officer on Tuesday in a surprise move that puts the former head of its investment bank in pole position to eventually succeed Noel Quinn as CEO.

The change came as HSBC shares were hit by a 42% drop in third-quarter profits, the result of loan losses and charges related to the sale of its French business as it seeks to appease investors. , including the Chinese group Ping An Insurance Group. (601318.SS).

HSBC stock, which fell 8%, was on course for its worst one-day performance since April 2020 as investors digested the sudden change in chief financial officer and lowered performance expectations.

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Elhedery, of Lebanese descent and holder of a French passport, took a six-month sabbatical from HSBC in January, citing a desire to travel with his family and explore his personal interests.

Quinn said that although outgoing chief financial officer Ewen Stevenson had done a good job of restructuring over three years, the London-based bank had succession in mind, effectively putting Elhedery, 48, at the top of the list to become CEO.

“There is no change in strategy as a result of these leadership changes,” Quinn, 60, said. “This is the position of the group executive committee with potential succession options for the future,” he told Reuters.

The former investment banker Stevenson, 56, who will leave HSBC next year, told Reuters he was “looking forward to some time off and considering future options”.

“Stevenson was undoubtedly seen as doing a great job among the investment community,” said Goodbody analyst John Cronin.

“Its exit is most certainly a surprise and it smacks of fallout at the highest management level in terms of the direction of travel for HSBC – which will raise many questions,” he said.

UNDER PRESSURE

HSBC reported pre-tax profit of $3.15 billion for the three months ended September 30, although this was down from $5.4 billion a year ago, it was well above forecasts analysts.

However, HSBC spooked analysts by saying its net interest income in 2023 would be lower than previous forecasts, despite a favorable interest rate environment, due to the weak pound.

The results also included a $2.4 billion drop in the sale of HSBC’s business in France, as part of a broader strategy to excise parts of its once-global empire to boost profits.

Quinn said regulatory approval had been filed for the sale of its Russia business, which Reuters said in July it would sell to Expobank.

HSBC has come under pressure from its largest shareholder, Ping An, to explore options including spinning off and listing its core business in Asia to boost returns. Read more

HSBC’s top turnover partly reflects the challenges of improving profits at a sprawling bank whose fortunes are closely tied to global interest rates and the Asian economy where it makes most of its money. profits.

Rising rates traditionally support banks’ profits as they can draw more from loans than they pay out to savers, but the current situation is clouded by the threat of an economic slowdown that could lead to heavy losses for investors. lenders.

HSBC’s net interest income rose 30% to $8.6 billion, the highest in eight years, mainly due to higher interest rates, but the bank said the NII in 2023 would be over $36 billion, below previous forecasts of over $37 billion.

HSBC also said performance was hurt by credit provisions of $1.1 billion, more than expected and compared to the release of $659 million in cash reserves set aside for expected credit losses. in the same quarter a year ago.

The bank also faces a darkening outlook in its key market of China, after President Xi Jinping’s nomination of loyalists sparked a sell-off in stocks this week on fears that Beijing will continue its stifling zero-COVID strategy. the growth.

“China is an important market not just for HSBC but for the world, and we want to see the economy continue to grow,” Quinn told Reuters when asked how COVID lockdowns were hurting growth. and HSBC business.

Quinn later told a press conference that the reshuffle had no impact on his own desire to stay on as CEO, saying he hoped to be at the helm for “many years”.

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Reporting by Anshuman Daga and Lawrence White; Editing by Kenneth Maxwell and Alexander Smith

Our standards: The Thomson Reuters Trust Principles.

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