Mark Kleinman: The world’s local bank just got more complex
Mark Kleinman is Sky News’ City Editor and is the man who gets the Square Mile talking in his weekly City AM column. This week he tackles HSBC’s shake-up, CBI losing its voice and recruiting a watchdog referee
The world’s local bank just got more complex
If it ain’t broke, don’t fix it. Investors in HSBC Holdings would be forgiven for having ‘revamp fatigue’ at the number of tweaks to its structure, and leadership, over the last decade.
The direction of travel, though, has been apparent for some time: in its most pared-back form, it has been to exit markets where the regulatory risks are either too great or opaque, and redeploy as much available capital as possible in Asia and other markets where it sees the most attractive growth opportunities.
Now, new chief Georges Elhedery has a bolder plan: split the business on an east-west axis in its corporate and wealth operations, and create standalone divisions for its Hong Kong and UK businesses.
HSBC hailed the move as a “simplification”, and in one sense it is. Both the number of geographic regions and the number of business units it is organised into will shrink under Elhedery’s plan.
But it also raises serious questions about the logic of HSBC’s broader business model – questions that many shareholders thought had been resolved when a break-up plan proposed by Ping An, its biggest investor, was thwarted last year.
Is HSBC, under Elhedery and veteran chairman Mark Tucker, paving the way for a formal split of the business into its regional components? Apparently not, but the mere reappearance of that question may give investors pause.
It also triggers doubts about the seamlessness of the bank’s ability to service global multinational clients in its corporate and institutional business across two more fully divided geographic units.
The isolation of its UK arm – the old Midland Bank – within HSBC’s new structure is also going to spark endless speculation about a plan to sell it, or list a chunk of it separately on the stock market. That may be no bad thing, but the Elhedery plan, at this juncture, looks to have reignited a debate that many investors felt had been settled for the medium term under his predecessor, Noel Quinn.
Whether or not HSBC describes itself as the world’s local bank any longer, questions about its future certainly just became a whole lot more complicated.
27 is a worrying number for ‘the voice of business’
Twenty-seven votes: that’s barely enough to fill the average primary school classroom. Nevertheless, that’s the number of ballots cast at last week’s annual meeting of the CBI, the self-styled ‘voice of business’.
The business lobbying group is, to say, the least, in recovery mode – and it’s no exaggeration to suggest that if it hadn’t pulled a metaphorical rabbit out of the hat by persuading the former Serco chief Sir Rupert Soames to become its chairman, it might not have made it this far.
According to the AGM minutes published on its website, the CBI has “introduced values of Courage, Brilliance and Integrity”. No, me neither. But it has at least lured back heavyweight members including NatWest Group and KPMG; and Rain Newton-Smith, its chief executive, has regained meaningful political access, posting on social media last week about her bilateral audience with the chancellor, Rachel Reeves, ahead of yesterday’s Budget.
In his circular to members before the AGM, Soames issued a rallying cry befitting his familial heritage: “Rarely, in our 60-year history, has the work of the CBI been more important as we hopefully draw a line under what has been a pretty ghastly decade for business, what with the aftermath of the global financial crisis, negative impacts of Brexit, Covid disruptions and the consequences of the Russian invasion in Ukraine.”
He is right in a very key sense: British business needs a robust, insightful and influential voice as much as ever. But with such a paltry turnout from members at an AGM that by any reckoning was symbolically meaningful, it seems legitimate to question whether the CBI’s members believe that it is the right organisation to carry such a crucial mantle.
Candidates might give football watchdog a red card
Who’d be a referee? That’s the question facing wannabe candidates for the £130,000-a-year job of chairing the Independent Football Regulator.
On the face of it, the prospects are deeply disconcerting to anyone without the thickest of skins. A civil war within the Premier League triggered by the legion of charges against Manchester City is the most prominent, and potentially far-reaching, of the issues confronting the new watchdog.
It’s far from the only one. As I reported on Sky News at the weekend, top-flight clubs are racing to formulate fresh plans for a new deal with their English Football League counterparts at a meeting next month.
The threat of a settlement imposed by a regulator may be enough to focus their minds, but I wouldn’t put big money on the new deal being resolved before a leadership team is lined up at the watchdog.
I understand that in the pre-election search for a chair for the IFR, the potential candidates included David Ross, the Carphone Warehouse co-founder. Whitehall officials tell me, though, that Ross has since withdrawn, no doubt cognisant of the limited likelihood that a Labour administration would appoint a prominent former Tory donor to the post.
The government wants a candidate with a strong understanding of economic and financial regulation, according to the recruitment ad placed last week. Experience of wearing a flak jacket might also help.