SIR JOHN BOND knows the fragility of success. “There is an old Chinese saying,” he reflects. “Today you are a cockerel, tomorrow you are a feather duster.”
Not that it seems to apply to him. At 64, the chairman of HSBC, the world’s second- biggest bank, for the past seven years shows no sign of slowing down. His globe-trotting schedule remains as hectic as ever and every working day in Britain begins with a run near his West London home before heading for head office at Canary Wharf, in Docklands.
He rarely gives interviews — his daughter, Annabelle, 36, commands the headlines for the Bond family, having recently climbed all the highest peaks on the world’s continents faster than any other woman — but his low profile should not be confused with a desire to step down any time soon. After 44 years with the bank, Sir John is still driven to take HSBC to greater heights.
Yet that does not mean that he is desperate for more acquisitions. Having been apprenticed to Sir William Purves, the prudent Scot who took HSBC from its Hong Kong roots and spread its influence around the world, Sir John is not likely to indulge in extravagant buying sprees. Sir Willie bought carefully, including Midland Bank in Britain, and his successor has also made his share of acquisitions, most notably the $14 billion purchase of Household International, the American lender, three years ago, but now he says: “We have predominantly an organic growth strategy.”
His belief in the merits of building rather than buying where possible lies behind a move which still puzzles some in the City. Two and a half years ago he recruited John Studzinski, a colourful mergers and acquisitions specialist from Morgan Stanley, to join the bank. The high-profile Studz seemed an unlikely hire for a group that in the past has appeared to favour the cult of the corporate personality over that of the individual. Sir John, however, was intent on building HSBC as an investment bank without paying billions for one. He made Mr Studzinski co-head of investment banking with Stuart Gulliver, a 25-year veteran of HSBC, and gave them money, and time, to make the project work.
The decision to expand investment banking, which entails offering multimillion-pound packages to bring in the best talent, seemed at odds with HSBC’s frugal image. But buying people is cheaper than buying a bank: Sir John reckons that the top people in investment banking should be able to produce three to five times their cost. Anyhow, the overall cost of the expansion represents around only 3 per cent of the bank’s £25 billion cost base. It clearly maddens the chairman that some commentators have still failed to grasp why the move makes such financial sense for HSBC.
“We have 5,000 clients where the relationship has been historically built round credit, funds and administration. We decided that there was an opportunity for us to expand to include advisory and equity capital markets in the areas where we have a strong client base.” The message he wants to be understood is simple: “This is a low-risk stategy to create an investment bank. The fact that it has become a cause célèbre is very puzzling.”
Sir John’s views on acquisition strategy are now likely to be influencing the thinking at another of Britain’s biggest companies, Vodafone. He joined the board of the mobile phone company at the beginning of this year. He has also been a director of the Ford Motor Group for several years.
Yet for someone who is such a force in business, he remains a little-known individual. Always attired in the sharpest of suits, he will nevertheless opt to travel economy class on short-haul flights. The notion that the bank’s money needs to be husbanded carefully has been driven into his psyche so that he will still be the one to turn off the lights if they are burning unnecessarily.
That attitude has helped him to grow earnings rapidly: from $9.7 billion in 2000 to $17.6 billion last year. Now, the excitement being generated in the emerging markets of the East could provide another growth spurt. Although HSBC earns a large slug of profits in the developed world, its historical roots are firmly in emerging markets, which gives it huge a advantage in the current climate. Its historical links with Hong Kong — the initials once stood for The Hongkong and Shanghai Banking Corporation — give it considerable advantages over rivals such as Royal Bank of Scotland and the Swiss UBS, both of which have taken stakes in Bank of China, which is due to float next year.
He sees HSBC, with its understanding of the culture of China, as being in a potentially unique position. “We have been there for 140 years continuously. Almost 20 per cent of my colleagues are Chinese. All of the advertising that we do in Hong Kong is beamed into southern China, where an estimated 457 million people live. It may be that up to 30 per cent of the banknotes that circulate inside China carry HSBC’s name.” Investing in China in these circumstances is, he believes, “a very natural thing to do”.
Sir John admits that the world’s other big emerging economy, Russia, may be a far more difficult nut to crack, but, after being reluctant to venture there before, he is now taking HSBC into Russia. HSBC does not have historic links with the country, but last week the bank opened up its first front, during the visit of President Putin to Britain. HSBC and Vnesheconombank, one of Russia’s oldest banks, signed a €200 million (£138 million) agreement, the first of its kind in Britain. Under the deal, HSBC will provide loans to the state-owned Vnesheconombank for financing contracts between European contractors and Russian corporates. The deal will cover projects in the infrastructure, transportation and manufacturing industries.
Russia, with its 140 million people and immense natural resources, is going to be a hugely important world economy, Sir John acknowledges. “The challenge for us is to find a role where HSBC can do something that will reward shareholders, is valuable to Russians and will allow us to maintain our standards.
“Russia is constantly on the agenda at HSBC. I think, as we sit here today, an organic strategy is the more likely.”
What of the future for the ski-loving father-of-three? Sir John evades the question and instead highlights the breadth and depth of management at the bank. Stephen Green, the group chief executive, is expected to take over eventually, although the banking chairman can work until he is 70. The bank also has the option of promoting Doug Flint, the current finance director, to the top job. Sir John, who has worked at the bank since 1961, says that the continuity of management is one of HSBC’s strengths. He claims that those who join HSBC can contemplate a satisfying life long career there, which is no longer the case in most industries,.
He started his career working behind a bank counter rather than as a high-flying trainee with an MBA. “I had the pleasure of the visiting our training centre last week. I told them with complete integrity that the training I had then is still the best.
“The problem is that today I would not have a snowflake’s chance in hell of getting into HSBC,” he says, with the characteristic modesty that colleagues insist is not false. Investors will hope that he will find a way of ensuring that a future John Bond would manage to get through the door.
