HSBC will need a ‘Leader’, not just a good banker
It used to be a standing joke in private banking in Hong Kong that if the clients only knew that all they had to do with their money was to buy HSBC shares - and live off the dividends for the rest of their life - every private banker would be out of a job.
That worked for 143 years, but the banking industry changed forever after the near meltdown in the global financial crisis. The banks got bailed out with our money because a financial collapse would cost the population their lifetime savings. But big banks are paying for it now as industry, technology and regulatory changes are creating tough times. Deutsche Bank, the world’s 10th largest, has just lost its two co-chief executives (a muddled concept) for not bringing home the bacon.
Stuart Gulliver of HSBC has shown himself to be a pretty good banker, but good bankers don’t make good leaders – that is something that has to be learned on the job – and it must come from the heart. Bankers too often favour the status quo. They lose big money on pet products that come and go with the fashion of the times. They listen to the self-important noise of their senior bankers and invest in today’s winners – only to find that they are tomorrow’s losers.
As chief executive, Gulliver has done ok – like an opening batsman on a sticky wicket, keeping his end up. He inherited some inglorious issues but a bank as big as HSBC was bound to pick up some of the US$200 billion in bank fines that the regulators have dished out since 2008.
Gulliver is a lifelong banker. More than 30 years with the same bank is an achievement that comes to few these days. It will not come to the 25,000 people, almost 10 per cent of the staff, who will be made redundant over the next year or so. A leader must have an element of ruthlessness if he is to manage for the benefit of the company and its shareholders.
However, as Machiavelli said, a leader must use ruthlessness deliberately, sparingly and carefully. Fear gives you years; empathy gives you lifetime service. Former British prime minister John Major once sent me a note that made me feel so good that I became a supporter for life.
Gulliver’s travels around his empire – and that of his strategists – has determined that The Bank’s focus will be towards Asia not Europe. It might be a good thing to sell the low-profit Brazilian and Turkish banks but he needs to be aware that bankers have a nasty habit of fighting the last war. If HSBC has only just discovered that Asia is growing faster than Europe, you have to wonder where they have been for the past 35 years.
If Europe and America actually do fine, continuing to invest there might be as good as fighting for more business in your own fiercely competitive backyard, where many of the other banks don’t have to worry about profitability. A good leader is also a contrarian and occasionally swims against the tide of strategic thinking.
Still outstanding is the question of whether The Bank will move its headquarters from London, with the smart money betting on a return to the “H” in HSBC. But why would you move to Hong Kong from the most international money centre in the world when Li Ka-shing, the smartest businessman in Asia, has just moved his headquarters to the Cayman Islands?
In these interconnected times it actually makes much more sense to move the headquarters of a global business to an anodyne global location. Jardine Matheson, now 183 years young, showed the way as far back as 1984 – it moved to Bermuda, keeping its primary listing in London and its business in Hong Kong. Maybe it’s a decision that all quintessential Hong Kong companies make around their 150th anniversary?
The Bank would still be strictly regulated in its places of business but the group would not be subject to national whims – no unfair, billion-dollar group bank tax in Britain; no midnight telephone call from Beijing asking for support for government policy.
My long-term investment in HSBC shares that I first bought in the 1970s has gone up and down but they are better than a private banker. I’m still betting on Gulliver learning his trade as a leader. But to change the course of the second biggest bank in the world will require more ruthlessness, empathy and contrarianism – and the boldness that comes from occasionally ignoring company strategists. Some decisions have to come from the heart. That is leadership.
Richard Harris is chief executive of Port Shelter Investment Management