HSBC Pivot Stokes Tension Between Hong Kong, London Bankers
(Bloomberg) -- HSBC Holdings Plc is shipping senior executives from its London headquarters to Hong Kong to seal a pivot by Europe’s largest lender to Asia. The moves are also stoking some discontent.
Already smarting from a cut to the bonus pool after losses in Europe, some senior executives in Greater China worry their push into the world’s second-largest economy could be slowed by added bureaucracy and blurred reporting lines, according to people familiar with the discussions who asked to remain anonymous discussing a sensitive issue.
With the global heads of investment banking, commercial banking and wealth relocating to Hong Kong this year, senior bankers expect friction with regional chief Peter Wong, who has so far enjoyed a high degree of autonomy. Wong has expressed his unhappiness about the costs of the relocations, one of the people said.
At the same time, some staff are encouraged by the move to shift more leadership to Hong Kong, the bank’s Asian hub, the people said.
The status of local leadership is a sensitive topic for HSBC, whose board and C-suite are dominated by westerners even as it makes almost all its profits in Asia and counts Hong Kong as its biggest market.
For HSBC, the changes are intended to demonstrate its commitment to a historic turnaround plan centered on Asia and help speed up local decision making. The bank has earmarked investments of about $6 billion for the region, on top of billions more in risk-weighted assets it intends to shift from moribund operations in Europe and the U.S. It’s targeting becoming a market leader in managing wealth in an increasingly affluent part of the world.
The growing strength of markets and the economy in Greater China is “shifting the geographic balance of power for HSBC,” said Ismail Erturk, a senior lecturer in banking at the University of Manchester. “But its main institutional shareholders are still international, not from China. This creates a complex situation for HSBC.”
The potential for friction hasn’t gone unnoticed in London. On a global call on April 14, Greg Guyett, the co-head of the investment bank who’s one of the executives moving, said unprompted that the reason for his relocation wasn’t because of poor management in Asia, according to people on the call. He emphasized that he would continue to keep his eyes on Europe and the U.S. as well, the people said.
While some were puzzled by his comment on performance, others on the call said they felt it was intended to reassure staff and highlight the contribution from Asia. The bank is scheduled to release first-quarter earnings on April 27.
“Asia Pacific is central to the long-term growth plans” of the bank and the move reflects HSBC’s intention to “locate more of our global leadership roles in our key growth region,” Chief Executive Officer Noel Quinn said in an April 14 memo.
Some roles that work directly with the top executives will also move to Hong Kong, according to Quinn.
A Hong Kong-based spokeswoman for HSBC declined to comment for this article.
The transfers coincide with another transition: the bank has started an informal search to identify a successor for the 69-year-old Wong, its long-time chief executive for Asia Pacific, people familiar with the matter said in January. A member of China’s top political-advisory body -- the Chinese People’s Political Consultative Conference -- Wong’s ties have been pivotal to mending relations with Beijing, frayed by the lender’s role in a U.S. probe of Huawei Technologies Co.
With most of the bank’s top management in London, away from its biggest market of Hong Kong, Wong has pressed for quicker engagement with Beijing’s concerns. He publicly endorsed the security law that China imposed on the financial hub last year, quietening criticism from pro-Beijing factions in the city.
Wong has been preparing for his eventual retirement by mentoring David Liao and Mark Yunfeng Wang, the heads of Asia Pacific global banking and its China operations, people familiar with the matter have said. Any discord between the incoming executives and Wong could complicate that effort. Liao, for example, reports to both Guyett and Wong.
HSBC is casting a wide net both within its ranks and beyond in its hunt for a replacement, a person familiar has said, with Wong viewed as difficult to replace.
Quinn signaled in his memo that relocating the executives could boost the bank across the region. “The move will also create significant opportunities for collaboration across the businesses in Asia,” he wrote. HSBC currently makes more than 80% of its Asia profits from just two markets: Hong Kong and mainland China
It’s unlikely that China wants HSBC to maintain its dominant position in Hong Kong, said Chen Zhiwu, director of the Asia Global Institute at the University of Hong Kong. “What had been expected to happen after 1997 is starting to happen,” Chen said, referring to the year Britain handed the colony back to China. “Moving some executives from London to Hong Kong won’t change that trajectory.”
Either way, HSBC’s leadership presence in Hong Kong, where it was founded in 1865, will now be the strongest since it moved its headquarters to London in 1993.
Along with Guyett, Nuno Matos, chief executive officer of wealth and personal banking, and Barry O’Byrne, chief executive of global commercial banking, are expected to be on the ground in the second half of this year.
Together, the three executives control HSBC’s main divisions, with only the corporate center remaining. Nicolas Moreau, who runs HSBC Global Asset Management, is also relocating. Georges Elhedery, co-head of investment banking and markets, will remain in London.
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