HSBC shares rally to two-week high after appointing AIA boss Mark Tucker as new chairman

Appointment breaks with HSBC tradition of naming insiders to the chairmanship while AIA shares record sharpest drop in three months

PUBLISHED : Monday, 13 March, 2017, 11:07am
UPDATED : Tuesday, 14 March, 2017, 12:04am

HSBC shares jumped to a two-week high after it appointed Mark Tucker, the chief executive and president of the largest independent public listed pan-Asian life insurer, AIA Group, as its new chairman.

Tucker, 59, will become a director and chairman designate from September 1, and officially become the new non-executive chairman from October 1, the bank said on Monday.

The appointment breaks an HSBC tradition of appointing insiders to the chairmanship.

HSBC’s shares surged 2.1 per cent to close at HK$64.40, the biggest jump since December. AIA shares dropped 3 per cent to close at a two-week low of HK$48.80, recording their sharpest fall in over three months.

The Hang Seng Index rose 1.1 per cent on Monday.

Tucker will succeed 61-year-old Douglas Flint, who has been running Europe’s largest bank for more than two decades, along with chief executive Stuart Gulliver who has been in place for over six years.

He will take responsibility for identifying a successor to Gulliver, who plans to retire next year, the bank said in statement.

AIA’s regional chief executive Ng Keng-hooi has been appointed to succeed Tucker as chief executive and president in September.

Tucker joined AIA in July 2010 from its London-based competitor Prudential and led AIA to its listing on the Hong Kong stock exchange in October that year.

“Having been CEO for seven years [at AIA] and with the company very well positioned to continue its strong growth, I believe now is the right time to make way for a new leader and for me personally to transition to a non-executive career,” Tucker said in a statement put out by AIA.

“I have worked closely with Keng Hooi for over 20 years and admire him as an executive with an exceptional track record of strong execution and commercial experience in the Asian region.”

Castor Pang Wai-sun, Core Pacific-Yamaichi head of research said: “[Banking and insurance] are two different industries. Insurers run a long-term and high-margin business while HSBC is a lender. I don’t think an individual person can hugely change the operating situation,” Pang said.

AIA reports robust results under shadow of dim outlook amid China’s capital controls

HSBC’s struggling business was largely the result of external factors, such as the economic environment in Europe, while HSBC’s Asian business has been doing well. AIA, meanwhile, has benefited from strong demand in the pan-Asia region, Pang said.

Pang expects to see profit taking in HSBC stocks after the rally, while AIA shares may recover soon as its internal infrastructure is built into good shape.

The statements confirming Tucker as the bank’s next chairman came after Britain’s Sky News first reported over the weekend that there have been continuing talks between HSBC and Tucker on the move.

Sky News described it as “a significant moment in the history of HSBC, which has never previously appointed an external chairman”.

AIA’s business has grown robustly in Asia since its initial public offering, with shares price soaring 112 per cent over the past seven years.

HSBC’s Q4 earnings result misses estimates, shares plunge most in 18 months

Its “value of new business”, a key measure of future profitability in the insurance industry, surged 25 per cent year on year to US$2.75 billion in 2016, based on actual exchange rates.

Tucker said last month that 2016 was AIA’s most successful year yet, and that the insurer has seen an excellent start to 2017 with strong value of new business growth in the first two months of the financial year.

HSBC, meanwhile, saw unadjusted pretax profit slump 62 per cent last year, or broadly flat once adjustments for one-off items were taken into account.

It reported a US$3.4 billion pretax loss for the three months ended December. When adjusted to remove one-off items, its pretax profit rose 39 per cent year on year to US$2.62 billion, still missing the US$3.78 billion average estimate of analysts compiled by Bloomberg.

HSBC shares have lost over 22 per cent in Hong Kong in the past seven years.

Tucker’s remuneration at AIA, excluding shares payment, was US$9.93 million in 2015, according to the annual report of AIA. Flint, meanwhile, earned £2.14 million (US$2.6 million) in 2016, down from £2.5 million a year earlier, according to HSBC’s annual report.