What on earth is going on at Britain’s biggest bank, HSBC? One can understand chairman Mark Tucker’s caution in not going to the substitutes’ bench too quickly when choosing a permanent new chief executive.
But allowing the substitute to do the hard work, to hit some difficult goals and then to put him on the transfer list is not on.
HSBC is, in many ways, the best-placed bank for growth in the world. Its domination in the Pacific, in more normal times, would be a licence to print money.
Pressure’s on: Noel Quinn, who became HSBC’s interim chief in August after John Flint was ousted, has outlined a sweeping shake-up of the bank
In the last year it has been battered by events: the political upheavals in Hong Kong and the coronavirus next door in China.
Unless these factors prove a long- term threat to President Xi Jinping’s capitalism-friendly autocracy, then there is no need to worry.
Banking can be a fashion enterprise. Interim chief executive Noel Quinn is a commercial banker whereas his predecessor but one, Stuart Gulliver, was strong on investment banking.
Gulliver argued that HSBC needed to be a full service investment bank which could offer its Asian and Middle East clients all that they need.
This certainly worked for HSBC in the Saudi Aramco float when it hurdled over Goldman and others who courted Riyadh for years.
Instead of building on the advantage which comes from being non-American and Asian-focused, Quinn is shrinking the investment bank.
Most of the assets being axed are in Europe and the US. But without a substantial presence in those markets, HSBC will cut itself off from global corporate clients seeking to access Asia.
The other major strategic change, a cull of one-third of its 224 US retail branches, looks undercooked. Some 35,000 jobs will go, including some at Canary Wharf.
Given the current health of UK employment, this should not be too disruptive. Profits way below expectations due to large write-offs sent shares down by 6.6 per cent.
Quinn had better hope that he will not become the sacrificial lamb for sub-octane earnings and an unconvincing revamp.
Over the coals
Glencore is a mining powerhouse with a fraught background.
Its history of operating in difficult territories such as the Democratic Republic of Congo (DRC) has attracted the interest of the US Justice Department.
The continued commitment to coal when other big mining groups such as Rio Tinto have pulled out makes it contentious for the green lobby.
The group is doing its best to normalise governance. An older generation of executives who brought Glencore to the London market are retreating and the group’s chief executive Ivan Glasenberg is signalling that he intends to make way within three years.
The super-fit 63-year-old continues to create wealth, collecting a dividend income of £202million for 2019.
He has set the group some carbon reduction targets which include the depletion of coal, oil and gas resources. In any case, thermal coal output falls well below the 25 per cent disinvestment target set by the world’s biggest investor Blackrock.
Regulatory clouds mean that Glencore trades at a much lower ratio of price-to-earnings than its peers.
Strip out the coal and it has a green profile as a large producer of cobalt and copper, two important ingredients of the e-revolution in motoring.
The fact that production is in the DRC and other problem geographies means that the shadow of green activism will be an ongoing factor for increasingly ‘woke’ investors.
The financial results are not impressive – it reported a $400million (£307.7billion) loss against a $3.4billion (£2.6billion) profit last time. Most of this is due to writedowns of assets, rather than underlying trading.
Yes Glencore has difficulties. Strip away coal and the possibility of some outsized fines, and there is value to be had.
Ground zero
Outrage from the GMB union that there were 974,000 people in the UK on zero-hour contracts at the end of 2019, an increase of 130,000 on 2018.
No mention that 180,000 people found jobs in the final three months of the year, that the unemployment rate, at 3.8 per cent of the workforce, is the lowest since 1975 and record numbers are in work.
What does the Chartered Institute of Personnel Management make of this? It notes zero-hour contracts ‘increased modestly’ and research shows that ‘the majority of zero-hour contract workers are satisfied with arrangements’.
QED.
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