LI, Tao @ Hong Kong

The HSBC headquarters in Central. Analysts said reports of the resignation of chief executive Michael Geoghegan would not cause a fundamental change in the bank’s management. Mike Clarke / AFP

CEO’s departure to have no effect on ops: Analysts

Despite the biggest management shakeup in decades, analysts believe that it will have little effect on the business operations of UK-based HSBC Holdings. Opinion inside the boardroom was allegedly split on its choice of a new chairman.

Citing sources, reports Friday said that Douglas Flint, HSBC finance director, will replace Stephen Green as chairman of Europe’s biggest bank. Current chief executive Michael Geoghegan is also expected to leave his job at the end of the year and be replaced by the head of investment banking, Stuart Gulliver. The reports come just two weeks after Green announced he was stepping down to become the UK’s trade minister.

“HSBC is so huge that it almost runs by itself,” said Chong Tai-leung, a professor of economics at the Chinese University of Hong Kong. “Despite the unprecedented firefight for the chairman’s role at the bank being worrying, I don’t believe it will affect the bank’s stability or its business – even if two crucial boardroom posts were replaced at the same time.”

General manager of Fullbright Securities, Francis Lun, said Geoghegan would have been expecting to be elevated to the chairman’s post as the bank traditionally hands the position to its chief executive.

He believes Green’s unanticipated resignation upset the bank’s traditional management succession and led to boardroom upheaval.

Lun holds the view that the episode is “a shame” and that the lack of unity in the management team will leave a shadow of doubt to investors that the board is looking out for its own interests rather than that of its shareholders.

“However, unlike American banks where individualism on the board prevails, UK banks including HSBC are more group-led, which guarantees a smooth transition when there are important changes on the board,” said Lun.

Paul Lee, an analyst with Taifook Securities, admits to being puzzled with the rumored appointment of Flint as chairman, believing him to be unqualified both in standing as well as experience .

“If Flint becomes the chairman, it will be a very rare case of a senior finance director leapfrogging the chief executive to be appointed as chairman ,” said Lee. “Moreover, the chairman’s role is primarily about socializing. I doubt that a financial expert in treasury and investment banks such as Flint is a good choice for the position”.

However, Lee does agree that operations within the bank will remain basically the same if the new chairman and chief executive are promoted from within the company.

The Financial Times earlier reported that there were two main contenders for the post, Geoghegan and former Goldman Sachs executive John Thornton, but the prospect of being passed over for a non-executive director agitated Geoghegan so much that he threatened to resign if it happened.

HSBC has rebutted that report as “offensive” and “nonsense”.

Geoghegan will be replaced by the 51-year-old Gulliver, who runs a division that doubled its operating profit between 2005 and 2009 to become HSBC’s biggest earner, according to a Bloomberg report.

The management restructuring still needs approval from the HSBC board, which is due to meet in Shanghai next Wednesday. HSBC closed Friday 0.60 percent lower at HK$80.60.

China Daily

(HK Edition 09/25/2010 page2)

http://www.chinadaily.com.cn/hkedition/2010-09/25/content_11342063.htm