(Bloomberg) -- HSBC Holdings Plc staff entering Georges Elhedery’s office in Dubai used to joke that it felt like walking into a freezing meat locker. The executive told a colleague that the abnormally cold room made him more productive.
Years later, when Elhedery returned from a sabbatical, he gave up an apartment in a smart West London district, and instead opted for a flat close to the bank’s headquarters in the staid Canary Wharf neighborhood, reasoning it would allow him to spend more time at work.
The moves, described by people familiar with the matter, seemed to pay off Wednesday when the British lender chose the 50-year-old banker as its next chief executive officer. He will succeed Noel Quinn, who surprised investors in April by announcing his exit after spending less than five years in the role.
The appointment, effective Sept. 2, marks a rapid ascent for the Lebanon-born, French-educated banker, whose challenge now is to show that he can further grow Europe’s biggest bank. HSBC is at an inflection point as executives weigh whether they should place continued focus on its business across Asia at a fraught time when geopolitical tensions are threatening to undermine those efforts.
Under Quinn, 62, HSBC cut thousands of jobs, sold major businesses and successfully fought off an activist campaign to break up the firm. More recently, the bank has slowed down hiring, asking investment bankers to rein in their travel expenses in a bid to curb costs. It also announced a reorganization of its global banking business that will winnow its existing sector teams down to just five groups.
But more importantly, it has pivoted from west to east, strengthening its roots in Asia, which contributes most of its revenue. In particular, it’s been focusing more on China and Hong Kong, where it was founded by a Scotsman in 1865.
The choice of Elhedery, who was widely seen as the favorite for the top job, shows HSBC’s deepening commitment to a region that the London-based lender considers key to cementing its future: He can speak passable Mandarin, making him the first CEO in HSBC’s modern history possessing the key language skill.
The ability to speak Mandarin is a recently acquired skill for the polyglot, who’s also proficient in English, French, Arabic, German, Spanish and Japanese. During his 2022 sabbatical, he spent part of his time-off learning the notoriously difficult language and a person familiar with the matter said he recently held a town hall meeting in Hong Kong partly in Chinese.
“He’s been with the bank for a while and he knows exactly how important Asia is and how important Hong Kong is,” said Allan Zeman, a business tycoon in the former British colony and one of the lender’s oldest customers. “Obviously, everyone at the bank is aware of the geopolitical situation. Every company basically has to deal with it.”
About two years ago, it seemed Elhedery’s time at the bank was drawing to a close after it was announced in early 2022 that he would be stepping down from his role as co-head of global banking and markets to take a six-month sabbatical. Rumors swirled that he might not return.
But in September 2022, Elhedery did come back, though not to his old job. Instead, for several weeks he shadowed Quinn.
“I have agreed with Noel that I will spend the next two months updating myself on enterprise-matters and supporting him on a few group projects,” Elhedery wrote in a memo to staff at the time.
Months later came the news that Ewen Stevenson, the lender’s well-regarded chief financial officer, would be stepping down. His replacement: Elhedery.
Unlike most of his predecessors, Elhedery has worked at other banks before HSBC. He joined HSBC in 2005 from Goldman Sachs Group Inc. and previously worked for BNP Paribas SA. At HSBC, most of his career has been in its investment banking arm, though he spent three years between 2016 and 2019 running its business in the Middle East.
HSBC Chairman Mark Tucker said Elhedery “has a track record of leading through change, driving growth, delivering simplification, containing costs and brings a strong focus on execution.”
Elhedery will be HSBC’s fourth CEO under Tucker’s chairmanship. The banker beat out both internal and external candidates for the gig, including HSBC’s wealth and personal banking chief, Nuno Matos.
His compensation includes an annual base salary of about £1.38 million ($1.8 million), a fixed pay allowance of £1.7 million and a pension allowance equivalent to 10% of his base pay. He’s also eligible to be considered for discretionary variable pay consisting of an yearly bonus of as much as 215% of his base salary and a long-term incentive award of as much as 320%, all tied to the firm’s and his own performance and in accordance with board-approved remuneration policy, according to a statement on Wednesday.
Tucker has previously said the next CEO will maintain the bank’s focus on deepening its business across Asia. That means a particular focus for Elhedery will be in Asian wealth management where the bank wants to become the leading provider to the region’s affluent and ultra-rich. To do this, it will have to eclipse UBS Group AG, which took a commanding lead in the market after its takeover of Credit Suisse.
HSBC has already bolstered its own position through a series of bolt-on acquisitions, but the bank has not ruled out more deals. Elhedery’s tenure could be marked more by the businesses he buys than the ones he sells.
There is also a US expansion to oversee. In May, HSBC opened a new US headquarters and is talking about building its operations in the world’s largest economy. Having spent years cutting back its North American operations, Elhedery may now have to oversee a re-entry into markets ranging from commercial and personal banking to wealth and investment banking.
But the key to success for Elhedery could be managing the bank’s business in Hong Kong and China. His efforts at honing his Mandarin skills may give him a key tool that his predecessors have lacked: the ability to talk to policymakers and key clients in their own language.
Elhedery “does not inherit a restructuring programme - the heavy lifting has been done and he can focus on evolving the business with his eyes likely falling on the investment bank given his background and ongoing pivot to Asia and the Middle East,” said Joseph Dickerson, an analyst at Jefferies International.
--With assistance from Denise Wee, Ambereen Choudhury and Laura Noonan.
(Updates with a customer’s comment in the ninth paragraph.)
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