James Ashton: HSBC has to prove that size still matters
Outlook It would be easy to characterise the size of HSBC's expected $1.8bn (£1.1bn) fine for money-laundering as a small price to pay to settle this sorry affair.
In fact, it was only a month ago that the bank doubled the amount it set aside for the fine to $1.5bn with an acknowledgement that it really didn't know how much it would be on the hook for.
Nervousness inside the company about how much it might have to pay was well founded. It didn't have much of a defence to allegations that it inadvertently shuffled money on behalf of Mexican drug lords and Russian gangsters.
What sounds like a big number is less than 10 per cent of last year's profit or smaller than the gain booked on the sale of HSBC's stake in Chinese insurer Ping An earlier this week. The balance sheet of the "world's local bank" can cope with it.
What is far most costly is the damage to HSBC's reputation and a bigger crisis brewing. Remember, HSBC was a long-standing, conservative lender, providing an alternative diplomatic corps that let the cream of British schoolboys learn the art of banking as "international officers" while travelling the world. High achievers built up an internal network. They stayed for years.
It all began to change two decades ago when HSBC set out on an incredible growth spurt. In the space of a few years, it gobbled up Midland Bank in Britain, and made significant moves in Brazil, Argentina, the US, France and Brazil. From a bank that had a market value of £10bn, it is worth more than 10 times that today.
The lapses of control and erosion of a gentlemanly culture suggest HSBC has simply become too large to run effectively. The old boys' network that served it well for years has splintered, or at best is stretched to breaking point.
To his credit, Stuart Gulliver, the chief executive, has already identified this and to conserve capital is retreating from markets where the bank plays a fringe role so it can invest where it is already strong. And it's only fair to say that some of those deals it did have paid off handsomely, such as the original Ping An investment.
A global player makes sense as long as its leader tells us it does and can keep all the plates spinning.
Investors pressing for short-term returns often have their heads turned by siren calls for a value-enhancing break-up.
In HSBC's case, settling its American fine only allows it to focus on its next problem: to demonstrate that size still matters.
- 1 Cyclist in Russia narrowly misses being hit by car and lorry
- 2 'F*ck it, I quit': KTVA reporter Charlo Greene quits live on air in spectacular fashion
- 3 What are your fingerprint words?
- 4 Gary Lineker involved in Twitter row after presenter rubbishes claims he will be warned by BBC over foul-mouthed tweets
- 5 Pink Floyd new album: Band unveil cover art for first record in 20 years
Rihanna 'nude pictures' claims emerge on 4Chan as hacking scandal continues
Slough train station deaths: Woman and child killed after being 'pushed in front of train'
Kim Kardashian 'nude photos' leaked on 4chan weeks after Jennifer Lawrence scandal
'F*ck it, I quit': KTVA reporter Charlo Greene quits live on air in spectacular fashion
Jennifer Lawrence: Leaked 4Chan sex video branded 'fake' by users
Scotland could still declare independence – even without referendum, says Alex Salmond
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...
£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...