There are few better ways of understanding the global economy than watching the performance of Britain’s biggest bank.
HSBC, under Noel Quinn’s leadership, has pulled out of France and is exiting Canada and Greece.
With its big footprint in China and the Pacific, a headquarters and retail bank in the UK and as the principal conduit for money passing from Hong Kong to New York, it is a critical barometer on the state of the world.
With its big footprint in China, a headquarters in the UK and as the principal conduit for money passing from Hong Kong to New York HSBC, is a critical barometer on the state of the world
Underlying earnings for the third quarter, when HSBC made £5.4billion, show rising interest rates mean banks that manage to limit bad loans in an era of recession will become cash machines.
HSBC upgraded its net interest forecast for the whole of 2022 to £28.3billion and to £31.9billion for 2023.
It is hard to think that Rishi Sunak and his Chancellor Jeremy Hunt will not see this as a ‘windfall’ to be raided as they seek to close the gap in the public finances.
The scale of HSBC’s balance sheet means it will be one of the largest beneficiaries from the widening interest rate margins. It also has problems to contend with.
HSBC may not have been a victim of the biggest Chinese property insolvency when Evergrande began struggling under a mountain of debt last year, but the gloom that has cast over the whole real estate sector in the region requires big provisions against future losses.
The Liz Truss episode at Number 10 and the volatility on UK financial markets also meant a modest £177million set aside.
Quinn is reshaping the bank with its biggest 8.3 per cent shareholder Ping An, with close connections to Beijing, looking over its shoulder.
The Chinese insurer wants HSBC to split off its Asian operations from the rest. Reality is that HSBC, while hugely important in the Pacific, has a unique role connecting the Far East to financial centres in New York and London.
The bank is being shy on why it has decided to replace finance chief Ewen Stevenson, a refugee from RBS (now NatWest), and insists it is nothing to do with strategy.
His replacement by George Elhedery, the co-head of global banking and markets, could well be a signal to Ping An of the importance of investment banking and trading. Moreover, in HSBC fashion it signals a succession structure when Quinn is through with his disposals.
Over the years, HSBC often has threatened to move its HQ from London to Asia. The possibility of yet another bank tax will cause squeals.
However, the political clampdown in Hong Kong and the increasing authoritarianism in Beijing make it imperative that HSBC still has an alternate identity and imprimatur of Bank of England regulation.
Old hand
At the age of 80, American activist Nelson Peltz – unlike his president Joe Biden – shows no signs of giving in to the ravages of age.
Down the decades he has made a habit of shaking up the fast moving consumer goods sector. His fingerprints are to be seen all over Mondelez (the owner of Cadbury), Schweppes (now part of Coke), Kraft Heinz, Nestle and Proctor & Gamble.
It should come as no surprise that when the veteran dealmaker came knocking on Unilever’s door, the board decided to let him in. He was regarded as more dangerous outside Blackfriars than inside.
By the time Peltz arrived, chief executive Alan Jope had made his unsuccessful pass at what is now Haleon (GSK’s consumer healthcare arm) and put in place a reorganisation. Some believe that the latter came too late for Jope to extend his life in the top job. The search is on for a successor.
Historically at Unilever, internal appointments are preferred. However, with Peltz’s network of contacts in the food and allied industries, it is not that surprising that he is exploring names.
Unilever is not known for modest pay levels. Nevertheless, poaching from the US, where executive salaries and bonus arrangements are in the stratosphere, may be tricky. One cannot blame Peltz for trying. But the nominations committee, headed by chairman Nils Andersen, should feel put upon.
Second hand
Watchers of The Apprentice will know that ‘previously owned’ clothes are a fashionable online category.
Data from hipster-tech bank Revolut shows the whole vintage sector is booming, with antique furniture sales up 71 per cent, spending on vinyl records 17pc ahead and used glassware sales ahead 29 per cent.
Who needs shiny new things?
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