By Parth Parikh,
Money and Investing Writer
HSBC (NYSE: HSBC), one of the largest banks in Europe, faced a transition phase when current CEO Douglas Flint and longtime chairman Stuart Gulliver announced their resignations from their posts in 2018.
The two had formed one of the longest-lasting CEO-chairman partnerships, and many felt HSBC would find their new replacements in-house, by hiring HSBC executives and other chairmen to the position.
According to the Wall Street Journal, for the first time in their 151-year history, the British firm decided to go in another direction, hiring AIA’s chief executive Mark Tucker to be the new CEO and assign Tucker the responsibility to name the new chairman of the firm that will replace Gulliver.
Upon receiving the news, HSBC’s stock went up nearly one percent. The move was stunning to many, who did not think Tucker would be a viable candidate for the position, coming from another sector of the business world, but nonetheless, the decision makes Tucker the first outsider to come in and take over the firm. Tucker will not be alone, though, as HSBC has hired four directors from outside companies in the past.
Mark Tucker has had an interesting road leading up to his pending job at HSBC. Starting off as a professional soccer player in England playing for lesser-known clubs, Tucker joined Prudential (NYSE: PRU) in the 1980s, working his way to CEO in 2005.
According to Reuters, upon resignation from the post in 2009, Tucker became the head of Asian life insurer AIA in 2010 and led the insurance company to its IPO in the Hong Kong Stock Exchange.
Tucker also joined Goldman Sachs and sits on its Board of Directors.
Tucker, along with finding Gulliver’s replacement as chairman, will also have to deal with a bank who has seen return on equity and full-year profits slump since last year and a company that has little to no growth in the Asian continent.
The return on equity for HSBC from last year was a mere one percent, compared to the long-term target of 10 percent, and the majority of the return comes from the retail banking and wealth management divisions of the business.
Another key issue for Tucker to overcome is the weakening of HSBC’s Chinese division growth, which makes HSBC’s strategy to move further into Asian markets harder and unlikely.
With Tucker’s years of experience as head of an Asian insurance company, HSBC hopes he can help in that field and bring them prosperity in the region.
One of the bigger and more global risk that HSBC faces as the transition from Flint to Tucker continues is the low global interest rates, which makes banking and business difficult for US and international banks.
With low rates, banks cannot invest their deposits comfortably and make a decent profit. HSBC, which sits on $1.2 trillion in customer deposits, is having a hard time investing that money and making a profit, which in turn, hurts growth and profit margins across the board.
Although raising interest rates does not fall into Mark Tucker’s jurisdiction, what does become his responsibility is finding ways to increase growth and bring in formidable profits in a time period where profits are almost hard to come by.
Flint has until September 2017 to step down as CEO, and analysts only hope to see HSBC rise to prominence like they have before.
A version of this article appeared in the Tuesday, March 21st, 2017 print edition.
Contact Parth at