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Flint age ends at HSBC

The banking giant’s chief executive John Flint has stepped down with immediate effect
August 5, 2019

The John Flint era at HSBC (HSBA) is over before it barely began. Just a year and a half into the role, the chief executive is to depart with little explanation, prompting lots of questions over the direction and stewardship over Europe’s largest lender.

IC TIP: Buy at 643p

Citing a good set of interim results and a reference to a “new personal challenge”, Mr Flint spun his exit as “the right time for change, both for me and the bank”. Daily duties pass to Noel Quinn, another HSBC lifer who since 2015 has headed global commercial banking operations. A 7 per cent rise in adjusted pre-tax profits and the promise of an imminent $1bn (£0.83bn) share buyback were presumably expected to cushion the unexpected change of captaincy.

But this was inauspicious timing, all the same. For one, there is the length of Mr Flint’s tenure, which suggests that the board has quickly run out of patience with the man anointed by predecessor Stuart Gulliver. Chairman Mark Tucker’s comments that “a change is needed to meet the challenges that we face and to capture the very significant opportunities before us” do very little to assuage that impression.

Judging by half-year numbers, it is difficult to pinpoint what might be described as failure. Adjusted revenues – from which HSBC excludes disposals, acquisitions, investments and fair value movements in financial instruments – climbed 8 per cent, thanks to strong growth in Asia, including a greater market share in five of eight “scale markets”. Market share in the UK and transaction banking also rose, while improving capital and cost efficiency and customer satisfaction ensured that most strategic priorities are moving in the right direction.

One weak spot was the US, where a 36 per cent drop in adjusted pre-tax profits led to a dip in the first-half return on tangible equity to 2.5 per cent. Aspirations to get this above 6 per cent by next year are now deemed unlikely, following the recent shift in the Federal Reserve’s approach to interest rates. A group-wide return above 11 per cent in 2020 is still in focus, although the first-half metric was flattered by an $828m dilution gain on the completion of Alawwal bank’s merger with HSBC subsidiary SABB.

Analysts at Investec forecast adjusted net tangible assets of 719¢ a share at the December 2019 year-end, rising to 740¢ the same time the following year. 

HSBC (HSBA)    
ORD PRICE:643pMARKET VALUE:£ 130bn
TOUCH:642.2-643p12-MONTH HIGH:728pLOW: 596p
DIVIDEND YIELD:6.6%PE RATIO:11
NET ASSET VALUE:950¢LEVERAGE:15.6
Half-year to 30 JunTotal operating income ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (¢)
201833.010.73631
201938.012.44231
% change+15+16+17-
Ex-div:15 Aug   
Payment:26 Sep   
£1=$1.21