Christmas Came Early for HSBC

In 2012, HSBC reached a settlement with the US Department of Justice (DoJ) in respect of charges that HSBC had been laundering money – more than USD880 million – for Mexican drug cartels.

The settlement consisted of a deferred prosecution agreement, a fine of USD1.9 billion, and the appointment of an in-house monitor, plus his supporting staff, at HSBC to ensure that the bank cleaned up its act.

The DoJ has now dismissed the deferred criminal charges. The monitor’s term is coming to an end.

This will be a source of satisfaction to recently retired HSBC Chairman, Douglas Flint, and about-to-retire CEO Stuart Gulliver.

HSBC has met its commitments to improve governance, vastly increased its complement of compliance staff, and at the same time, led by Stuart Gulliver, slimmed down through sales or closures the vast portfolio of disparate businesses many of which were accumulated by former Chairman Sir John Bond.

And yet for Stuart Gulliver there may well be a sense of regret. It has long been suggested by HSBC insiders that he was an unlucky general, a reference to the first French Emperor, Napoleon, who wished to be served only by lucky generals. Admittedly, it was of little use to him at the battle of Waterloo in 1815.

Contrary to HSBC tradition, the transition from the torpid Geoghegan and Green regime to the next generation was a messy affair.

Chairman Green announced his resignation earlier than anticipated in November 2010 to take up a life peerage and become a trade minister in the Conservative Government led by David Cameron. This sparked a succession struggle that led to the departure of then HSBC CEO Michael Geoghegan, who had been suggested by some media to be the most likely successor to Green.

In these circumstances, there must be a sense for Stuart Gulliver and his team that more would have been achieved with a sounder inheritance from more proactive predecessors. It was left to CEO Gulliver and team to answer for and rectify the omissions of their forebears.

New Chairman, Mark Tucker, and incoming CEO, John Flint, have a far more favourable start to their term in office. HSBC is in good shape, the global economy looks strong and interest rates are rising. Keeping the show on the road, letting the business tick over could be a valid strategy.

However. Reports suggest that Mark Tucker is not a tick over sort of businessman. And there are some issues outstanding, the most prominent of which is the perennial dependence of the Group on Asia. It currently accounts for around 75 per cent of the profits.

In the coming months, Chairman Tucker and CEO Flint – no relation to Douglas Flint – will have to work out their relationship and evolve a strategy to present to the board. It is then the world will know whether a happy Christmas for HSBC will become a very happy New Year.

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