HSBC; A Question of Balance

HSBC, my university, my "home", my employer, played a large part in my life for 37 years. We eventually parted company on good terms when I retired almost four years ago. In time-honoured HSBC tradition, a retiring Chairman severs links with the old organisation - mostly for good reasons, although for some not so good reasons. Like losing the accumulated knowledge of, in my case, 37 years of "corporate history", and contacts built up particularly in the later years. On balance, however, it is the right thing to do. Your successor, for example, does not want you looking over his or her shoulder all the time. No, you move on.

Fast forward to today, and into the ongoing media "feeding frenzy", as the world tries to work out just how deep the economic hole is that we have dug for ourselves. All of a sudden my past associations with "The Bank" have been re-visited by some, especially in Hong Kong. In the last few weeks I have been sought out for comment on HSBC, presumably as a last resort and because the institution itself has been sensibly tight lipped. But as I have explained on many occasions before, most notably in Korea last year, I have no association with the organisation other than maintaining contact with a few friends. (By the way as a digression, and even though the SCMP report has not been confirmed yet, when Margaret Leung does become CEO of Hang Seng Bank, that Bank will have put a very talented person in the right place! I believe yesterday's positive stock market uptick in HASE's shares reinforces that view.)

Still, despite my lack of qualification to comment on figures I know nothing about, or policies of which I only have an historic knowledge, I do occasionally speak out if only to try and bring some sense of perspective back to the world of banking in general and HSBC in particular. Things like complaining about the analysts who make wild predictions - and who then some weeks later revise their figures in "the light of more detailed research". Please. Don't you see the damage this does?

The latest bout of silliness happened yesterday, and in advance of HSBC's results announcement due on Monday. I received a very polite email from a lady who identified herself as Fiona Law from Mingpao who wanted to ask me for my comments on a couple of issues. But the question that really caught my eye was:

"Do you think management should step down to bear the responsibility for the group's deteriorating performance?"

Wow! Can you ask that again? I suggested to Ms Law that the question was not terribly intelligent and pre-judged the results which I assumed she had not seen. What, I asked her, was the performance bad in relation to - other global banks? Had other management stepped down in roughly comparable banks? I did not say - although I would have hoped she could have worked it out for herself - that of all the banks, both HSBC and Standard Chartered seemed to be judged to have done reasonably well under the circumstances.

Perhaps I should have asked Ms Law if in fact her editor should not consider stepping down to bear responsibility for the deteriorating quality of his or her reporters questions. Or if the head of Morgan Stanley should step down for allowing his analysts to make comments based on insufficient information, which they seemed to admit to (Morgan Stanley analysts backtrack) after the damage had been done.

What has happened to our perspective? To our balance? The Moody Blues album "A Question of Balance" , released in 1970, is one of my all time favourites and, as my wife will testify, one of my favourite tracks from it is "Melancholy Man". If we keep allowing the media and others to sift through the debris to try and find every morsel of news that they can turn into something that sounds bad, I shall be listening to "Melancholy Man" a lot more frequently.

As for HSBC? Go for it. On Monday be your traditional,usual steadfast, frankly honest selves. If there is bad news, and there must be lots especially from the USA, you will tell us clearly, and you will sort it out. Do the right things, but don't expect your audience to treat you with "balance".

Comments

[hans olijve]

Good..hope she learned a lesson..but media always like to applaud the bad news instead hurraying the good news..

[Alton Yam]

It was shock that Mr Elden describe Fiona's questions is gibberish, particularly Eric Knight of Knight Vinke Asset Management asked in Jan“Why should HSBC's shareholders take all the pain when Household bondholders are unsecured?” ,“Why should the HSBC board carry on just to save their own reputations when many other banks in the world are now considering similar moves?” Maybe we should bear in mind at the time of 2002 when HSBC acquire HouseHold Mr Elden is Executive Director of HSBC Holdings.

[David Eldon]

Thank you for the comment, and you are correct that I was an executive director of the bank at the time of the Household acquisition. Even with the benefit of hindsight, and based on the information that was available at the time, did the transaction make sense? Almost certainly yes, and therefore it would probably be done again. So what would be changed? Probably the way in which the acquisition was managed. HSBC (again with hindsight) should have put its own people in at the top.
But you are confusing issues. The question from Fiona was not about Household, but it was more general. Also the question was not gibberish; it was quite well written but I said it was not very intelligent.
It might interest you to know that I have subsequently met face to face with Fiona and explained to her exactly where I was coming from, and I have listened to her also.
Playing the "blame game" is all too easy when you have the benefit of hindsight - but as I said to Fiona, you have to keep things in broad perspective and not be so narrow.

[jeremy]

Fiona's questioning was definitely poor. And Alton, do you have any idea how large organizations work and what David's position on the Household acquisition in 2002 was? This tarring with broadbrushes is very lazy.

Along with the punishment HSBC has been receiving, I also can't believe the HKMA has been getting so much flak....there are many worse regulators out there!

Sloppy thinking in the mass media played a huge part in cheer-leading the bubble and now are working hard to dig us deeper into the hole.

Much talk has been devoted to aligning executive compensation with longterm sustainability of banks (imagine if Chinese banks, rather than completely privatise, went the SEB way). But attention should also be paid to ensure that quality, intelligent, reporting in the normal newspapers that the man on the street reads does not become extinct.

Britain, which has probably the best journalists in the world, also has the worst gutter presses. Absent British traditions of tolerance, moderation, and intellectual traditions; a thriving gutter press can really do some real damage in Asia.

BTW, this blog is becoming a must-read, only other ex-banker blog I follow except for Vernon Hill at Bankstocks (for different reasons though)