By Lawrence White
LONDON (Reuters) -HSBC Holdings Plc has appointed its Chief Financial Officer Georges Elhedery as its next CEO, the bank said on Wednesday, opting for continuity as it tries to kickstart growth.
Elhedery, 50, who becomes HSBC's third chief executive in less than eight years, will replace outgoing head Noel Quinn from Sept. 2. While the 160-year-old lender did consider external candidates, it has traditionally appointed its CEO from within.
"For most investors, continuity is essential, especially after the battles HSBC’s board has been through in recent years, to persuade shareholders that its strategy is right," said Matt Britzman, equity analyst at Hargreaves Lansdown.
Elhedery's appointment comes as the bank tries to shift from restructuring to growth, at a time when helpful interest rate hikes may have peaked and geopolitical tensions simmer.
Iain Pyle, senior investment director at HSBC shareholder abrdn, said Elhedery had made a good impression on the market over his 18-months as finance chief, and was "a clear communicator".
"It's a continuity appointment, but a strong candidate and I think will be taken well today," he said.
HSBC defeated a resolution last year backed by Chinese insurance giant Ping An and other Hong Kong-based shareholders who were seeking a spin-off of its lucrative Asia business.
Ping An, which owns 8.9% of HSBC according to LSEG data, declined to comment on Elhedery's appointment.
Lebanon-born Elhedery began his career in banking as a rates trader before joining HSBC in 2005. He led HSBC's Middle Eastern, North Africa and Turkey region between July 2016 and February 2019.
After that, he was the co-head of the Global Banking and Markets business, the division that houses HSBC's trading and investment banking advisory businesses, and accounted for 24% of the group's revenues last year.
In October 2022, he was unexpectedly appointed CFO, just weeks after returning from a sabbatical - a move that groomed him for the top job.
"Working together with our talented team, I look forward to delivering exceptional value to our clients and investors by driving strong performance on a sustainable growth trajectory," he said.
Quinn, who led HSBC for five years, will remain CEO until Elhedery starts in the role. At the time of his surprise exit announcement in April, he had said he wanted a better work-life balance and planned to pursue a portfolio career.
Quinn oversaw a raft of asset sales, navigated a global pandemic and the push by rebel investors to break up the bank, guiding the lender to record profit.
CHALLENGES AHEAD
Stanley Tsai, founder of Hong Kong-based investment advisory firm Antler Capital, said he wasn't surprised by the choice.
"Some investors might've wanted someone with more direct Asia experience, especially with the Greater China portfolio, but it’s always been the non-Asia business that has presented the most overwhelming challenges," he said.
That said, HSBC is highly sensitive to souring relations between China and the West and delivering on growth ambitions in Asia will be challenging at a time when China's economic growth is slowing and the bank risks being embroiled in geopolitical tensions.
Elhedery will also have to manage HSBC's exposure to China's lingering bad loans crisis, which triggered a shock $3 billion impairment charge last February on the bank's stake in Bank of Communications (BoCom).
He has relatively little direct work experience in Asia, having spent the bulk of his HSBC career in roles across its Middle East and Africa businesses, but did learn Mandarin during his six-month sabbatical, according to sources at the bank and media reports.
HSBC said it will announce Elhedery's successor as Group CFO in due course.
Ahead of the announcement, the bank was exploring financial incentives and reallocating key projects to retain those who miss out on the top job, two people with knowledge of the discussions told Reuters.
HSBC will report its interim results on July 31.
The lender's shares in London and Hong Kong were flat after the announcement. HSBC's shares have risen 7% this year, against an 18% gain in the STOXX Europe banks index.