Removal of CEO indicates increased ruthlessness of HSBC's Board: S&P

August 6, 2019

HONG KONG - HSBC Holdings today announced the departure of its CEO, John Flint, alongside its results for the half-year to June 30, 2019. S&P Global Ratings views this high-profile exit as a surprise because we consider the results to be solid.

"Moreover, Mr Flint had only been CEO for a short time, having announced his strategic plan in June 2018. The rationale for replacing the CEO is not obvious at first glance, therefore," S&P says.

"HSBC's non-executive chairman has alluded to an increasingly complex and challenging global environment in which the group operates, and the need for management to speed up and simplify the execution of its strategic targets.

"The departure of Mr Flint follows HSBC's appointment of a new Chairman in 2017 and CFO in 2018, both of which were external hires. This contrasts with the bank's typical practice of promoting from within.

"The revamp of key positions indicates that the Board has become less tolerant of relative financial underperformance, in our view.

"Still, we don't believe this ruthlessness suggests a broader strategic shift away from its approach to its balance sheet, which is generally more prudent and disciplined than most global banks.

"HSBC has appointed its head of global commercial banking, Noel Quinn, as interim CEO."

S&P says HSBC's first-half results were in line with its expectations, including the announcement of a $1 billion share buyback.

Reported adjusted profit before tax was $12.5 billion, up 6.8% year-on-year, helped by revenue growth being greater than cost growth. On a reported basis, return on tangible equity was 11.2%.

"HSBC has maintained its target of returns being above 11% in full-year 2020; an acceleration in cost initiatives appears to be an important reason why it has maintained this target, despite net interest margin headwinds emerging," S&P says.  www.standardandpoorscom (ATI).