People
&Markets
HSBC memo
lashes out at
leadership
The performance of HSBC’s investment
bank has come under renewed scrutiny
after a scathing memo that claims to be
the work of disgruntled senior bankers
sharply criticised its strategy and
leadership.
“We are entirely fed up and
DEMORALISED ûANDûHAVEûNOûCONlDENCEûATûALLû
in the existing leadership,” the memo said,
a copy of which was seen by IFR.
The seven-page memo was unsigned,
and IFR was not able to identify the author
or authors. It was dated August 25 and
sent to Chairman Mark Tucker, CEO John
Flint and board members.
IFR spoke to senior HSBC bankers and
former bankers who said they were not
the author, but some said many of the
criticisms struck a chord.
h4HERESûDElNITELYûAûLOTûOFûTRUTHûINûIT vû
one former senior HSBC banker said.
Another former banker said, aside from
criticism of some individuals, the memo
could stoke questions from shareholders,
Tucker and Flint of whether more needs to
be done to tackle underperformance.
The memo mostly focused on the
Global Banking business, which includes
M&A advisory and debt and equity
underwriting, and its head Robin Phillips,
but said much of its criticism applied to
the Global Markets unit too. Phillips has
run Global Banking for the past 12 years.
“The division’s leadership has, year on
year, utterly failed to create a successful
strategy which would have even a chance
of succeeding,” it said. It said Phillips andthe existing management team “should be
immediately shown the door”.HSBC REJECTED THE CRITICISM.
“We are proud of our Global Banking
business and of what Robin and his senior
leadership team have achieved over the
past few years,” the bank said. It declined
further comment.
The memo said there was no effective
route to provide upward feedback at
the bank. “Hence this memo, which is
whistleblowing on incompetence,” it said.
Such public criticism of a bank chief
from insiders or former staffers is rare,
and it can create problems. When former
Morgan Stanley bankers took out a full-
page ad in 2005 criticising CEO Phil Purcell
for his reluctance to increase leverage and
risk, he resigned soon after.NEW LEADERSHIP
HSBC is under new leadership at the top,
after Flint took over as CEO at the end of
&EBRUARY ûlVEûMONTHSûAFTERû4UCKERûCAMEû
in as chairman.
Global Banking contributed US$3.8bn
OFûNETûOPERATINGûINCOMEûLASTûYEAR ûmATûONû
2016 and 2015. Global Markets brought in
53BN ûALSOûmATûFROMûAûYEARûBEFORE
HSBC ranks 10th in global investment
banking fees this year, up from 12th in
each of the past six years, according to
Thomson Reuters data. It ranked 14th in
2005, the year before Phillips took the
unit’s helm, and has hovered between
10th and 15th every year since.
Critics say it has underpeformed for a
long time and has been unable to carry
ITSûSTRENGTHûINûDEBTûANDûlNANCINGûANDûITSû
global footprint across to areas such as
ECM and M&A advisory. Its improvement
in overall fees is on the back of DCM,
where it ranks seventh globally this year,the same as last year, up from 12th in
2005, Thomson Reuters data show.
It has continued to lag outside the top
ûlRMSûFORûBOTHû-!ûADVISORYûANDû%#-û
It ranks 38th in M&A this year and was
42nd last year, from 22nd in 2005, and
HASûBEENûOVERTAKENûBYûBOUTIQUEûlRMSû
including Moelis.
The anonymous memo said there
have been multiple failings by HSBC and
Phillips, who joined HSBC from Citigroup
in 2003 and was appointed co-head of
global banking in February 2006.
HSBC has regularly made mistakes in
hiring and promoting weak bankers, the
memo said, citing a particular failure in
resources and energy.
It cites as an example last year’s ousting
of Matthew Westerman, the former
Goldman Sachs banker who was hired to
co-head Global Banking with Phillips in
February 2016.
“Westerman didn’t suffer fools gladly,
was abrasive, rude and inconsiderate:
but he wasn’t actually wrong, either in
his assessment of the issues or in what
he did to try and put things right,” the
memo said. It said Phillips persistently
undermined Westerman.
The memo said HSBC had had “at least
eight fundamental restructurings and
re-organisations in the past 11 years” yet
there was never a coherent strategy.
It said productivity, measured by
revenues per banker, was “appalling” and,
in advisory products, HSBC was “not even
on the same planet” as Goldman Sachs on
that measure.
The memo concludes by asking the
board to take its complaints seriously.
“However, if this has to be played out in
an active public context, then so be it,” it
said.
STEVE SLATER, KIT YIN BOEYWho’s moving where...
CLSA has made
two hires to its debt
capital markets
team as the Hong
Kong-headquartered
brokerage firm
continues to scale up.
Tim Lindley has
joined as managing
director and head of
fixed income capital
markets for Australia.
Based in Sydney, he
reports to MichaelLuk, global DCM
head, and Andrew
Norman, Australia
country head.
Lindley was most
recently with Morgan
Stanley, where he
was head of its fixed
income and capital
markets business
for Australia. He
was previously with
Barclays, Deutsche
Bank and UBS.CLSA has also hired
Sarath Pendyala as
director and head of
debt capital markets
and structured
products for India.
Based in Mumbai, he
reports to Luk and
Pankaj Agrawal, head
of India corporate
finance and capital
markets. He was
previously with
Deutsche Bank. Boutique
investment bank
MOELIS AUSTRALIA
has hired veteran
credit specialist Steve
Bennett as managing
director.
Bennett was
most recently
group treasurer
of Consolidated
Press Holdings. He
previously worked at
UBS.