Samir Assaf, the head of HSBC Holdings Plc’s investment bank, referred to himself as the “last man standing” among his generation of peers in London. On Tuesday, it was revealed that he’ll be leaving the post. It won’t be the last big change at the giant Anglo-Asian lender.
Slowing global growth, declining interest rates, trade tensions and unrest in Hong Kong are forcing HSBC to pull capital away from under-performing businesses. As such, a deep retrenchment of its investment bank presence outside its core Asian markets — namely in Europe and the U.S. — is inevitable. Assaf has run the unit since 2011, but he will move to a non-executive director role as part of an overhaul of the bank by HSBC’s interim chief executive officer Noel Quinn. The retreat in Europe may be easier under new leadership.
Lebanese-born Assaf rose through the HSBC ranks after the British firm acquired Credit Commercial de France SA, where he’d worked previously. Under his watch the investment bank never really hit the big league. Pretax profit from HSBC’s global banking and markets business was $7 billion the year Assaf took over; by 2018, it was $6.3 billion.
Even in European bond and currency trading, this powerhouse of global trade has been losing market share to its peers. In Asia, HSBC was ranked first place in fixed income last year, according to data from Coalition Development. In EMEA, it was sixth.
A 30% decline in pretax profit at the investment bank in the third quarter of 2019 heightened the urgency. The bank may partially exit stock-trading in some developed Western markets, an area in which it has never been particularly strong. Analysts at Jefferies think HSBC could cut as much as $33 billion of risk-weighted assets at the investment bank to save 25% in costs, while losing about 10% of revenue in Europe and the U.S.
HSBC is Asia’s top corporate lender and the region’s top bank for trade finance and cash management. Its investment banking future may be brighter catering to this customer base.
A change at the top of the investment bank may also revive a culture that hasn’t always attracted praise. Conduct issues have ensnared HSBC for years. In 2012, it paid $1.9 billion in fines for helping Mexican drug cartels launder money and clients breach sanctions.
In a glaring example of its difficulty dealing with alleged misconduct, HSBC last year allowed its former markets chief Thibaut de Roux, to speak at a town hall meeting about conduct while an investigation into his alleged sexual harassment was underway. The Bank of England has admonished the lender for two years running for making insufficient progress in tackling risks around financial crime and staff conduct.
Assaf told executives this month that he considered it an emergency situation. Time appears to have run out.