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HSBC taps former investment bank chief as CFO; Q3 profits fall 42%

HSBC taps former investment bank chief as CFO; Q3 profits fall 42%

FILE PHOTO: HSBC logo is seen on a branch bank in the financial district in New York, U.S., August 7, 2019. REUTERS/Brendan McDermid/File Photo

SINGAPORE: HSBC on Tuesday (Oct 25) named Georges Elhedery, a former head of its investment bank, as its new chief financial officer in a surprise move that leaves him in pole position to eventually succeed Chief Executive Noel Quinn.

The sudden elevation of Elhedery, 48, at the London-headquartered bank comes after he took a six-month sabbatical in January, citing a desire to travel with his family and explore personal interests.

Quinn told Reuters that while departing CFO Ewen Stevenson had done a good job restructuring the bank over the last three years, the move was done with succession in mind - with the apparent effect of catapulting Elhedery to the front of the queue.

Since his return to HSBC in September, Elhedery has been working on projects for Quinn. He is one of several Lebanese bankers to rise to the top ranks at HSBC, including his predecessor heading the investment bank, Samir Assaf.

The change came as HSBC reported profits slid 42 per cent in the third quarter, hit by rising loan losses as well as charges from the sale of its French business as it seeks to boost profits and placate unhappy investors including its largest, China's Ping An Insurance Group.

Shares of Hong Kong-listed HSBC, which makes the bulk of its sales and profit in Asia, fell 2.5 per cent in a firm broader market .

"There is no change in strategy as a consequence of these leadership changes," said Quinn, 60. "This is about how the group executive committee is positioned with potential succession options for the future," Quinn told Reuters.

Stevenson, 56, will leave the bank next year. "I am looking forward to some time off and thinking about future options," he told Reuters.

"Stevenson was undoubtedly seen as doing a great job amongst the investor community," said John Cronin, analyst at Goodbody.

"His exit is most certainly a surprise and it smells of a fallout at the top management level in terms of direction of travel for HSBC - which will raise many questions," he said.

The bank posted a pretax profit of US$3.15 billion for the three months ended Sep 30. That was down from US$5.4 billion a year ago, but well above the US$2.45 billion average of analyst estimates compiled by the bank.

The results included a US$2.4 billion hit from the sale of the bank's business in France, part of a wider strategy by HSBC to excise parts of its once globe-spanning empire to boost profits.

HSBC's net interest income swelled by 30 per cent to US$8.6 billion, the highest in eight years mainly due to rising interest rates. Net interest margins rose to 1.57 per cent, climbing 22 basis points from the second quarter.

HSBC has come under pressure from shareholder Ping An to explore options including spinning off and listing its mainstay Asia business to increase shareholder returns.

The bank is also exploring a potential sale of its Canadian unit, as it tries to streamline operations in order to lift profits amid pressure from Ping An.

"We remain on track to achieve our cost targets for 2022 and 2023," said CEO Quinn.

HSBC's CEO, who has been running the lender on a permanent basis for more than two years, said in the results statement that the bank aimed to "deliver its returns target of at least 12 per cent from 2023 onwards and, as a result, higher distributions to our shareholders".

HSBC, the first big British lender to report quarterly earnings, said the quarterly performance was affected by credit provisions of US$1.1 billion, compared with the release of US$659 million of cash reserves set aside for expected credit losses in the same quarter a year ago.

Rising rates traditionally buoy bank profits as they can make more from lending than the sums they pay to savers, but the current picture is clouded by the threat of an economic downturn that could cause hefty losses for lenders.

HSBC on Tuesday reported a snag in its plan to woo long-suffering shareholders with increased payouts, saying it needs to boost its core capital level of 13.4 per cent back above 14 per cent before it can resume buybacks and dividends.

Quinn told Reuters he was "very confident" it could do this by the first half of next year, by increasing revenue and managing costs.

Source: Reuters/rj


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