HSBC announces surprise management change as profit beats expectations

HSBC has reshuffled its management team with the surprise departure of its chief financial officer as part of boss Noel Quinn’s succession plans, reporting better-than-expected third-quarter profits.

The bank said on Tuesday that adjusted pre-tax profit came in at $6.5 billion, up from $5.5 billion a year earlier, beating analysts’ estimates of $6 billion, as rising global interest rates boosted profits.

HSBC announced that Georges Elkhederi, co-head of global banking and markets, will replace Ewan Stevenson as chief financial officer, allowing Elkhedery to potentially replace Quinn.

In a surprise move, the bank said Stevenson would step down at the end of this year. Greg Gayet, formerly co-head of Elhedery, has become executive director of global banking and markets, effective immediately.

“My goal is to provide the council with. . . options for potential succession,” Quinn told the Financial Times. At the same time, he added: “I’m not going to retire anytime soon, I’m here for many years.”

The bank raised its guidance for net interest income to $32 billion this year and a minimum of $36 billion next year. Quinn added that “next year will be the first year that we report a return on tangible capital above 12 percent.”

However, the bank kept its dividend payout ratio guidance at 50 percent in 2023 and 2024.

It reported third-quarter pretax profit of $3.1 billion, up from $5.4 billion a year ago, though it was well ahead of analysts’ expectations of $2.5 billion. The drop was largely a result of the hit from selling it French retail business and a $1.07 billion provision for expected credit losses, reversing a $659 million allowance made in the same period a year ago.

Stephenson said a “weak” Chinese property market and a “mild recession” in the UK were the main factors behind the provision.

Adjusted for impairment and currency effects, revenue rose 28 percent year-over-year to $14.3 billion, boosted across all businesses by higher interest rates.

The solid quarterly results came despite recent turmoil in foreign exchange and UK government bond markets, and will serve to bolster HSBC’s defense against calls to split its Asian and Western operations.

This year, the bank faced pressure from its largest shareholder Ping Anwhich owns more than 8 percent of the company and says the spinoff of the bank’s Asian business will create up to $35 billion in additional market value.

Asia accounted for more than 55 percent of HSBC’s adjusted pretax profit of $6.6 billion in the third quarter. Quinn said: “We continue to have a constructive dialogue with Ping An.”

Although the bank has repeatedly rejected Ping An’s demands, it is working to reshape its global network to focus on Asia and other high-growth regions.

HSBC is in the process of exiting Greece, and said this month that it was at an early stage strategic review of its profitable Canadian business which could result in $9 billion in sales.

Still, Quinn played down speculation that the bank was about to offload its Mexico business. “Mexico is not going to be put up for sale any time soon,” he said.

“We see that business activity is growing. It’s a good profitable business, and we believe it can be even more profitable and profitable,” Quinn said.

The bank’s capital buffers — the Common Equity Tier 1 ratio — fell 0.2 percentage points to 13.4 percent from the previous quarter, partly due to the sale of a French retail bank.