New CEO clicks HSBC Rubik’s cube into right place
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Liam Proud
LONDON, Oct 22 (Reuters Breakingviews) -HSBC HSBA.L, 0005.HK has changed a lot in its almost 160-year history. Yet many of its CEOs have grappled with a familiar question: how to manage a global bank with overlapping management teams for the different regions and business lines? New boss Georges Elhedery has landed on a logical fix. But if it works too well, there is a risk investors will wonder if HSBC really needs to be so sprawling.
Barely seven weeks after getting his feet under the desk, Elhedery is making his mark on the London-based bank. The former chief financial officer on Tuesday announced the promotion of risk boss Pam Kaur to fill his old job. He also unveiled a sweeping overhaul of the lender’s structure.
The three existing global business lines will become four new divisions. The two entities that currently serve businesses – commercial banking, and global banking and markets – will merge into one new super-unit, covering everything from smaller corporate clients to trading and debt underwriting. Meanwhile, the domestic-focused UK and Hong Kong divisions will become their own separate standalone reporting divisions. The fourth and final unit will be focused on international wealth management and related businesses.
There’s much to like. First, Elhedery’s plan drops the pretence of the local Hong Kong and British divisions working as integrated parts of separate global business lines. The new UK unit, for example, will comprise the domestic-focused retail and commercial bank, which for supervisory reasons functions broadly as a standalone balance sheet anyway. It always seemed likely that this unit and the Hong Kong-focused one already operated of their own accord, and the new reporting structure makes that clearer.
Second, the rejig gets rid of some overlapping responsibilities. The old structure included both global business-line bosses and separate regional heads. It wasn’t always clear to investors who was closer to the action. Now, the bosses of the new geographic structure, split into “Eastern” and “Western” clusters, will be the same people who also head the business lines: David Liao and Surendra Rosha for the Hong Kong and the Eastern geography, and Michael Roberts for the wholesale unit and Western markets. In other words, there’s less overlap in the management structure, thus boosting accountability.
Still, there are a few questions for Elhedery to answer. Retail banking in Mexico and Australia lack an obvious home. Nor is it clear how much money the reshuffle will save. Over time, the new structure could raise more fundamental questions. If the UK and Hong Kong domestic-focused businesses outshine the rest of the business, it raises the question of whether they need to be part of HSBC at all. Elhedery’s predecessor Noel Quinn offloaded several single-country retail divisions, like France. Doing the same with one of the bank’s two home-country units would be extreme, but the new structure might one day at least put it on the agenda.
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CONTEXT NEWS
HSBC on Oct. 22 said that it had appointed Pam Kaur as chief financial officer, effective from the beginning of 2025.
Chief Executive Officer Georges Elhedery also said that he was restructuring the group along four new business lines: Hong Kong, the United Kingdom, corporate and institutional banking, and international wealth.
The boss of the corporate and institutional unit, Michael Roberts, will also oversee a geographic cluster of businesses known as the “Western markets”, which will comprise the non-retail banking bits of the UK business, continental Europe and the Americas.
David Liao and Surendra Rosha, joint heads of the new Hong Kong unit, will also head the “Eastern markets” geography, which includes all of Asia, Oceania and the Middle East.
Geographic breakdown of HSBC 2023 pre-tax profit https://reut.rs/3YeqIbi
Breakdown of HSBC's existing business lines https://reut.rs/4hdyTNQ
Editing by Aimee Donnellan and Streisand Neto
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