HSBC sacks CEO John Flint, hires Citigroup veteran Michael Robert

Flint's exit follows weeks of adverse Chinese media coverage of HSBC's role in the arrest of Huawei CFO Meng Wanzhou.

    HSBC ousted its CEO, John Flint, under whose watch HSBC shares fell nearly 14 percent [Arnd Wiegman/Reuters]
    HSBC ousted its CEO, John Flint, under whose watch HSBC shares fell nearly 14 percent [Arnd Wiegman/Reuters]

    HSBC ousted John Flint as its chief executive after just 18 months in a shock move the chairman of Europe's biggest bank said was needed to speed up progress on priority areas such as the turnaround of its United States business.

    HSBC will also cut around two percent of its workforce - or around 4,000 jobs - this year as it seeks to reduce costs, Chief Financial Officer Ewen Stevenson said, adding that the company will pay out a total of around $650 to $700m in severance costs and that the reductions will be biased towards senior managers.

    CEO Flint's exit was a result of differences of opinion with chairman Mark Tucker over Flint's more tentative approach to cutting expenses and setting revenue targets for senior managers to boost profit growth, a person familiar with the matter said.

    HSBC disclosed the departure of Flint, 51, alongside its half-year results on Monday as it forecast a gloomier outlook for its business, embattled by Brexit, an escalation of a trade war betwee China and the US, an easing monetary policy cycle, and unrest in HSBC's key Hong Kong market.

    HSBC, which makes more than 80 percent of its profit in Asia, said that its global commercial banking unit head, Noel Quinn, will be interim chief executive.

    Shares in HSBC, which fell nearly 14 percent during Flint's tenure, were down 1.7 percent in London at 1111 GMT, even though the company reported a 16 percent rise in profit and a revealed a share buyback of up to $1bn.

    Flint, who previously ran London-headquartered HSBC's retail and wealth management business, was chosen as CEO in February 2018 in the first major decision by Tucker, who told Reuters: "It's the right time for change, and doing it clearly and decisively from a position of strength is very important."

    A key difference with Tucker concerned Flint's efforts to turn around HSBC's underperforming US business, the person familiar with the matter said.

    HSBC declined to comment.

    Tucker, who became HSBC's first externally appointed chairman when he joined HSBC's board in late 2017, said that the search for a new CEO, which will include both internal and external candidates, could take up to a year.

    Huawei heat

    Flint's exit also followed weeks of adverse Chinese media coverage over HSBC's role in the arrest of Huawei Chief Financial Officer Meng Wanzhou.

    China's Global Times ran an editorial on Friday saying the company "feels heat on Huawei CFO cases", suggesting HSBC had erred in cooperating with US authorities - and could face penalties.

    "Our business operations in China continue as normal," Tucker told analysts during a conference call when asked whether the bank faced blacklisting in China over the Huawei situation.

    HSBC executives at the time of his appointment saw Flint as a safe pair of hands and a natural successor to mentor and previous CEO Stuart Gulliver.

    Outlining his strategy in June last year, Flint set out plans to invest $15 to $17bn over the next three years in areas including technology and China.

    "We have been uninspired by the 'business as usual' strategy," analyst Ed Firth at broker KBW said.

    "We suspect that any new CEO is still more likely to be internal, but will need a more dynamic approach to improving underperforming areas of the business," he said.

    US woes

    HSBC said it no longer expects to achieve the targeted six percent return on tangible equity (return on equity or ROE) by 2020 in the US, where it has struggled for years to build to scale and compete.

    That missed US goal is still below the overall group aim of getting to more than 11 percent ROE by 2020.

    HSBC hired Citigroup veteran Michael Roberts in July to head its US business, in a renewed effort to turn it around.

    The US business is not "getting the proper returns", HSBC's CFO Stevenson told Reuters, adding the unit has also been hit by the change in the monetary policy cycle.

    HSBC's investment banking business has also struggled in recent years as it lost a string of senior executives and saw US rivals cash in on booming domestic stock markets.

    Revenues in HSBC's global banking and markets division fell by three percent in the first half compared with the same period last year.

    Revenue risk

    HSBC's pretax profit for the first six months of 2019 rose to $12.41bn from $10.71bn in the same period a year earlier, helped by a surge in retail banking and Asia revenues.

    "Interest rates in the US dollar bloc are now expected to fall rather than rise, and geopolitical issues could impact a significant number of our major markets," HSBC said.

    The US-China trade war has taken its toll on trade-focused banks such as HSBC and rival Standard Chartered, which last week warned that the escalating tensions may have an impact on its business customers.

    Tucker played down the impact of protests in Hong Kong that are against an extradition bill and that have evolved into a broader anti-government backlash. He said HSBC remained confident about the future of the Asian financial centre.

    Analysts had been watching closely to see whether the bank would announce a fresh buyback, as a failure to do so would have been read as a sign of mounting caution by HSBC's management.

    Prior to the latest buyback announcement, HSBC had purchased more than $6bn of its own shares since 2016.