The Bond Between East and West
June 1 1997 by JP Donlon
In Quicksilver Capital: How the Rapid Movement of Wealth Has Changed the World, Richard McKenzie and Dwight Lee, both adjunct fellows at the Center for the Study of American Business at
Although Wriston’s Citicorp is a dominant conduit for global capital in the emerging markets, it is closely followed by HSBC Holdings, the London-based group with a strong capital base and long pedigree in
HSBC Investment Banking rebrands the operations of James Capel and Samuel Montagu, which it had previously acquired. The purchase of J.P. Morgan’s international U.S. dollar-clearing operation in 1996 secures HSBC Financial Institutions among the top five participants in CHIPS, the
Salomon Brothers’ John Leonard expects the group, which has posted strong volume gains in
Both the group chairman, Sir William Purvis, and the group CEO, John R.H. Bond, are British yet steeped in Asian experience. Bond, 55, joined Hongkong Bank in 1961 and worked in
What do you consider the global business consequences of
At HSBC, every year we hope to operate with sharper pencils and more customer focus, but other than that we regard it as
What advice would you give to Western investors with interests in
The first thing to understand about
That’s straightforward in banking, because banking is essentially the same around the world, though with different levels of sophistication and bankable population. The progress we make will be gradual. The Chinese authorities would not wish to have foreign banks dominate their financial sector. However, they’re comfortable with them as 10 percent or 20 percent of the system. We have good relationships, particularly at People’s Bank of China and Bank of China, which are both competitors and friends, and have made progress developing our business there; it’s profitable.
People tend to think of
Do you see some business sectors that might fare better than others?
Infrastructure is clearly the call of the moment. Transport-aircraft and, to a lesser extent, ships. Cars will grow with purchasing power in countries like
What is your strategy for growth?
Geographically, we see opportunities in three main areas:
We look carefully at the position of commercial banks within the financial systems around the world, because in some countries-
Do you have predetermined hurdle rates for acquisitions?
Hurdle rates are fine when considering a bolt-on acquisition to an existing business. You can see clearly how quickly you can make it earnings-enhancing. New areas-geographical or product-don’t always lend themselves to slide rule analysis. You put out your best case and your worst case, do customer research, and then decide.
What are your plans for the States?
It comes back to our core strategy. We don’t want to be large for largeness’ sake, we want to be large because there are things we can do for the customer base that we acquired through an acquisition and because it makes sense for our shareholders. Priced at rates that we find acceptable, those transactions are few and far between in
What are your plans for your Wells
joint venture and other alliances? Fargo
A lot of Wells Fargo’s clients in
We recently announced an alliance with Wachovia, which has a strong global cash management capability that we are interested in for our clients in the
You don’t want to complicate these relationships; you just want to look at what you can do for each other’s client base, and whether it makes economic sense.
How does Mondex work. What are you trying to do there?
Mondex is a substitute for cash that has the capacity to become universal. The debit card can only deliver value in a fairly narrow area. It requires big machinery, a point-of-sale terminal, that you don’t find in low-value transactions. Any Mondex customer can do a money transaction with any other Mondex customer. It can also carry six currencies. We’re pilot testing it in two
Long-range, it will make us more efficient. Handling cash accounts for an estimated 25 percent of total bank costs in the U.K. Mondex offers convenience and security for our customers, and lower costs and greater efficiency for our shareholders.
At the World Economic Forum, Andy Grove and Bill Gates both argued that technology will revolutionize certain businesses-banking perhaps. What’s your view?
It would be foolish not to understand the challenge programs like Quicken and Microsoft Money represent. But the main challenge is more on the asset side, where the mutual fund industry is a major competitor for the individual’s savings. No client worries much about where they borrow money from, as long as the price is right, but they think long and hard before depositing money. People joining banks 20 years ago looked for security and not a lot more. That life has changed dramatically. And that’s why banks must become more professional and more client-oriented every day. Banking is conceptually fairly simple. There aren’t a lot of original strategies. It’s a battle about execution; it’s the person who does it effectively and efficiently who wins. So, is the world getting more competitive? Yes, no question. Are banks dinosaurs? Definitely not.
How does your extremely global orientation -and Asian heritage-fit in?
One of our challenges is in bringing Asian productivity and service into Western markets, and taking Western products and delivering them in
The only way to have a universal standard is to have a lot of core training. We attach tremendous importance to bringing together the executives from around the world right at the start of their careers, and then at regular intervals thereafter. The biggest unseen benefit is that it creates a network of people who know each other.
What is your personal challenge as a chief executive?
My role as CEO is to plant the seeds of tomorrow’s revenues. We inherited an excellent business that wasn’t made an excellent business by standing still. It was made by people at the top thinking about how the business should be grown.
A CEO also has a day-to-day responsibility for controlling the main risks we run around the world and setting the ethical values and management style of the organization. I firmly believe those are set from the top. We’re fairly parsimonious here. We set a standard by driving secondhand cars and travel economy on trains.
We’ve all learned a tremendous amount from working in
During your career, what was your most formative experience?
It’s been my lot in life to spend nearly a third of my career fixing parts of our group that weren’t doing well. From that experience you learn what you shouldn’t do, because it’s easy, once things have gone wrong, to see how they went wrong. My most formative experiences have come out of difficulties that we faced, while the most exciting part of the job is building. I can’t claim troubleshooting is a pleasurable occupation, because it isn’t. The fun part of the job is building for tomorrow.