HSBC’s chief executive Noel Quinn is retiring from the bank, according to a company statement filed on the Hong Kong Stock Exchange (HKEX). Quinn, who began his career with HSBC in 1987, will step down after leading the organisation for nearly five years, initially serving as interim head in 2019 following the resignation of his predecessor John Flint, who held the position for two years.
Quinn’s potential suitors will have their hands full, opines Eric Ritter, adjunct professor of economics for Lakeland University in Japan and former hedge fund manager, speaking to FinanceAsia. “Because the London headquartered bank derives the bulk of its income from Asia, its bottom line inherently reflects the region’s investment climate more than what unfolds across Europe,” he explains.
The sentiment is further underscored as the bank shifts additional capital and resources east. A potential slowdown in manufacturing, overseas trade tensions, or general weak consumer sentiment will flow into the bank’s operations, but these are not unknown challenges for either the executives or its shareholders, Ritter adds.
Building out its Asian business deepens the bank’s alignment to China’s recovery. In the bank’s annual report, group chairman Mark Tucker acknowledged that China’s 2023 reopening was bumpier than expected but highlighted that the economy managed to grow inline of its 5% target, which should be maintained for this year, he wrote.
China’s first quarter GDP of 5.3% came in ahead of market expectations. While the reading pushed aside gloomy sentiment, government officials may not be pressured to extend policy support, which could risk losing the economic momentum gained, according to a research note from AXA IM.
Shareholder returns
Quinn’s announcement came as the company also reported its quarterly earnings. The group’s operation posted $12.7 billion in profits for the three months ending in March 2024, as higher interest rates were margin accretive while cost cutting initiatives filtered down to the earnings.
Along with an interim dividend of $0.10 and a special payment of $0.21 from its Canada sale proceeds, HSBC announced buybacks of $3 billion, totalling $8.8 billion in shareholder returns. Besides the special dividend, share buybacks are welcomed by existing shareholders, as it demonstrates that bank executives see its public stock offering unrecognised value, Ritter explains.
HSBC’s next CEO knows that returning cash from divested assets is not a long-term strategy, as investors are analysing how the bank’s new Asian business lines will contribute to the future. That onus falls into divisions such as its wealth operations, which brought in more than $2 billion in revenue, a 12% increase from the same quarter a year ago. Life insurance, familiar territory to Tucker as former chief executive officer of AIA, is a key part of this plan.
Besides investing into new businesses, either through M&A or organic growth, Quinn’s successor will navigate calls from influential shareholders like Ping An Insurance, who have repeatedly demanded the bank to spin off its Asian business. At the company’s AGM, Quinn was re-appointed as a director with 84% of the vote, the lowest tally of any executive.
Quinn’s successor will follow a CEO whose tenure was defined by the challenges posed by both the pandemic and the commitment to address climate change. Even as interest rates plunged, Quinn distinguished the larger societal challenges, writing in the bank’s 2020 annual report “if the Covid-19 pandemic provided a shock to the system, a climate crisis has the potential to be much more drastic in its consequences and longevity.” As part of its initiative, the bank plans to achieve net zero across its operations and supply chain by 2030.
Besides the stock exchange in London where the bank is headquartered, HSBC lists shares in Hong Kong and New York. Juggling various local priorities can transmit tensions overseas for the new head, as few Asian investors have likely forgotten when the bank scrapped its dividend payment during the pandemic at the UK regulator’s request. While HSBC’s share price has risen 40% since the start of Quinn’s tenure in March 2020, it recovered more than $100 billion in market value from the depth of the pandemic.
The outlook for the bank remains tough and whoever leads the reins of HSBC will no doubt have their hands full. Investors now wait to see which candidates will raise their arms to be considered the next leader of a 160-year-old institution, knowing how heavy those challenges will be.
