HSBC has overhauled its leadership team with the surprise departure of its chief financial officer as part of succession plans for boss Noel Quinn, while reporting higher than expected profits in the third quarter.
The bank said on Tuesday that adjusted pre-tax profit was $6.5bn, compared to $5.5bn a year earlier, surpassing analyst estimates of $6bn as a global rise in interest rates helped spur higher returns.
HSBC announced that Georges Elhedery, co-head of global banking and markets, would replace Ewen Stevenson as chief financial officer, putting Elhedery in position to potentially succeed Quinn.
In a surprise move, the bank said Stevenson would step down at the end of this year. Greg Guyett, formerly Elhedery’s co-chief, has been made chief executive of global banking and markets with immediate effect.
“My ambition is to provide the board with . . . options for potential succession,” Quinn told the Financial Times. However, he added, “I’m not stepping down any time soon, I’m here for many years to come”.
The bank upgraded guidance for net interest income to $32bn this year and at least $36bn the next. Quinn added that “next year will be first year we’ll report return on tangible equity above 12 per cent.”
However, the bank maintained its guidance for a dividend payout ratio of 50 per cent in 2023 and 2024.
Pre-tax reported profit for the third quarter was $3.1bn, down from $5.4bn a year ago, although it came in well above analyst expectations of $2.5bn. The drop was largely the result of a hit from the sale of its French retail business and a $1.07bn provision for expected credit losses, reversing a $659mn release made in the same period a year ago.
Stevenson said the “weak” China real estate market and a “mild recession” in the UK were the main drivers of the provision.
After adjusting for impairments and foreign exchange impacts, revenues rose 28 per cent from a year ago to $14.3bn, rising across all businesses thanks to interest rate increases.
The solid quarterly results come despite recent turmoil in the UK’s foreign exchange and government bond markets, and will serve to bolster HSBC’s defence against calls to split its Asian and western operations.
The bank has faced pressure this year from its largest shareholder Ping An, which holds a more than 8 per cent stake in the company and argues spinning off the bank’s Asia business would create up to $35bn of additional market value.
Asia accounted for more than 55 per cent of HSBC’s $6.6bn in adjusted pre-tax profits in the third quarter. Quinn said: “We continue to have constructive dialogue with Ping An.”
While it has repeatedly rebuffed Ping An’s demands, the bank is working to reshape its global network to focus on Asia and other high-growth regions.
HSBC is in the process of exiting Greece and this month said it was in the early stages of a strategic review of its profitable Canadian business that could lead to a $9bn sale.
However, Quinn quashed speculation that the bank was going to offload its business in Mexico. “Mexico will not be up for sale soon,” he said.
“We’re seeing that business activity grow. It’s a business that’s producing good returns, and one we believe can produce even higher returns and profit growth,” Quinn said.
The bank’s capital reserves — its common equity tier one ratio — dipped 0.2 percentage points to 13.4 per cent from the previous quarter, partly as a result of the French retail bank sale.
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