IN the ever changing world of banking, it was the turn of HSBC’s new chief executive Stuart Gulliver yesterday to inform investors of his bank’s strategy for the future. In recent weeks, both Bob Diamond of Barclays and António Horta-Osório of Lloyds Banking Group, have had a turn at imposing their personalities at their new posts.
Osório has caused the biggest splash, dramatically reversing his bank’s policy on the mis-selling of payment protection insurance, and in effect causing all his rivals to abandon their appeal against the complaint measures. Osório is causing a stir in banking circles, with some already comparing him to his Portuguese compatriot the football manager Jose Mourinho, the self-proclaimed Special One. Life is unlikely to be quiet in UK banking while Osório is around.
Gulliver is a different proposition. There will be change at HSBC, but it is likely to come about in an evolutionary rather than revolutionary way.
Yesterday around 100 investors and shareholders took the lift to the 41st floor of the bank’s Canary Wharf headquarters to hear Gulliver and 17 of his top managers talk about focus, connectivity and efficiency savings. The day lasted from nine in the morning until 6.20 in the afternoon and the sessions broke only for occasional refreshments.
Cost cuts are essential, was one message, with between $2.5bn and $3.5bn cut from the annual cost base in an effort to bring the cost income ratio down.
But the real message is on focus; focus on the most profitable countries to be in and a focus on the most profitable businesses to be in.
In Hong Kong and the UK, for example, HSBC will continue to build on its large retail presence but in many parts of the world, where it is sub-scale, it will exit. HSBC currently has 296,000 employees in 87 countries but the bank has said that at least 39 of those countries are earmarked for possible exit.
Advisers say that Gulliver is intent on bringing in some of the initiatives he presided over as head of global banking – selling unprofitable arms, keeping costs down and letting go the least efficient five per cent of employees every year – to the bank as whole.
All in all, it sounds pretty sensible as a strategy and could well enhance shareholder value. But my money’s on Osório to create the most headlines and best performance in the years ahead.
As the Kremlin-backed company Russian Helicopters pulled its $500m London flotation yesterday, as we said it would the day before, its chief executive came out with a curious statement. “We believe market participants will benefit from more time to reflect upon the true value and growth potential of our business,” he said.
Sorry to state the obvious, but I reckon investors spent a month reflecting on the group’s true value and too many of them decided they didn’t want any of it. End of.
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