- HSBC CEO Noel Quinn to retire
- Eight FTSE 100 firms have already changed leader in 2024, with four more changes now in the pipeline
- HSBC’s shares have lagged the FTSE 100 during Mr Quinn’s tenure
“HSBC’s first-quarter pre-tax profit is slightly better than expectations and the bank’s declaration of a quarterly dividend and a special dividend will also please, even if they were well trailered, so chief executive Noel Quinn can argue the announcement of his plan to retire coincides with some good news,” says AJ Bell investment director Russ Mould. “However, HSBC is no longer the most-highly valued of the FTSE 100’s megabanks, on the basis of price to net asset, or book, value, and it is now one of the cheapest on an earnings and yield basis, as the cloud cast by China’s economic outlook continues to linger.
“Both Lloyds and NatWest trade on a higher multiple of book value (albeit very, very marginally) and only Standard Chartered is as cheap as HSBC on the basis of forward earnings multiples. This again suggests that the exposure to China and Asian emerging markets offered by both HSBC and Standard Chartered is no longer seen by investors as an asset but a potential challenge, at least in the near term.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts. *Book value for Q1 2024 except Standard Chartered (Q4 2023). **HSBC include $0.21-a-share special dividend
“Since Mr Quinn took the helm in August 2019, HSBC has had to navigate Covid-19, the very long lockdown in China and then handle the Middle Kingdom’s turgid post-pandemic economic recovery, which has been held back by the spectacular real estate bust.
“All of these factors have weighed upon the bank’s share price performance, even if analysts’ believe that HSBC will set new all-time highs for both annual profit and dividend payments in 2024.
Source: LSEG Datastream data
“Even then, analysts seem to suspect that this may be as good as it gets for HSBC, as profits are not expected to progress in the next two years. Even if asset disposals, such as the French retail operation and the Canadian unit, may be one of the reasons for that, the economic trajectory of China and Hong Kong is a key concern, especially as the Asian operations generated $5.5 billion of the $12.7 billion reported pre-tax profit for the first quarter of 2024.
Source: Company accounts, Marketscreener, consensus analysts' forecasts. 2024E includes special dividend of $0.21 per share
“Asset disposals, a focus on costs and the absence of any major litigation or conduct bills during his term will lead shareholders to believe that Mr Quinn has done a solid job during his tenure, despite the unhelpful economic backdrop, although a return to a global interest rate environment that vaguely resembles ‘normal’ has helped HSBC’s net interest margin and thus its overall earnings power.
Source: Company accounts
“The timing of Mr Quinn’s ultimate departure is not clear, as the search for his successor begins. With just over four-and-a-half years in charge as of today, Mr Quinn is the forty-second longest-serving FTSE 100 chief executive, and his stint compares to an average tenure of just over five years across all of the bosses in the UK’s leading index.
Source: Company accounts. As of 30 April 2024
“After a very busy 2023 for changes at the top, 2024 is off to a more sedate start, although nine FTSE 100 constituents have taken on a new leader this year, and eight more have changes planned, either this year or next.”
Source: Company accounts
