Stuart Gulliver is not a man in a hurry

STUART Gulliver has made no secret of his long-held desire to win the top job. Having coveted the prize for so many years, he might have imagined taking over in more propitious circumstances; no-one dreams about their first set of results knocking £4bn off the market cap. But during his three decades of service, Gulliver has demonstrated a huge amount of patience. Yesterday, he had one message for shareholders: he is not a man in a hurry.

In a way, it’s just as well. It wasn’t just that pre-tax profit of $19bn missed expectations by around $1bn. The bank also reduced its return on equity target from 15-19 per cent to 12-15 per cent. It was Basel III that proved the major culprit, with the bank estimating the new standards will impact its core tier 1 ratio by around 250-300 basis points, 100bps higher than most analysts expected.

Reduced return on equity due to stricter capital requirements is now a familiar refrain across all the banks. But it was the perennial problem of costs, which grew from $34bn to $38bn, that caused most concern. These got worse over the course of the year: the cost to income ratio was 53 per cent in the first half, rising to 58 per cent in the second. Gulliver wants to reduce the ratio to 52 per cent, but he is unlikely to achieve his target until 2012. If anything, it could rise even higher in 2011, due to the cost of restructuring the business.

There are two glimmers of hope. First, with a relatively low loan-to-deposit ratio of 78.1 per cent, the bank stands to gain as interest rates rise (the famously cautious bank doesn’t factor market expectations for short term rates into its forecasts). Second, Gulliver’s patience could prove a virtue; to slash costs indiscriminately, especially in markets like China, for short-term gain would be a huge mistake. A HSBC man to his fingertips, Gulliver is sure to take his time.