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HSBC eyes payouts, new roles for execs pipped to CEO job, sources say

The HSBC bank logo, in Mexico City

By Sinead Cruise and Lawrence White

LONDON (Reuters) - As HSBC prepares to name its third CEO in nine years, the bank is exploring financial incentives and reallocating key projects to retain those who miss out on the top job, two people with knowledge of the discussions told Reuters.

Europe's biggest bank could reassign its technology transformation and innovation strategy, currently overseen by CEO Noel Quinn, away from his successor, the people said, speaking on condition of anonymity.

HSBC is expected to pick its new chief executive from a crop of internal candidates, with an announcement possible as soon as this month, two other sources with knowledge of the matter said.

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The bank is keen to retain top talent after a string of internal changes and as it faces challenges including tensions between Britain and China, its key markets, and a lacklustre share price performance.

Three shareholders, including two of HSBC's 20 largest, told Reuters they were concerned the CEO appointment could lead to more management upheaval.

Picking Chief Financial Officer Georges Elhedery as CEO, for example, would see the CFO role occupied by a third person in less than three years.

"Promotions do leave gaps elsewhere, and that merry-go-round can be problematic if not handled well," one of the investors said.

The reassigned projects could come with significant pay incentives as they represent the majority of the weighting in Quinn's key performance indicators, HSBC's remuneration report shows. Quinn's total pay package doubled in 2023 from the previous year to 10 million pounds ($12.8 million).

"HSBC is conducting a robust and rigorous process to find its next Group Chief Executive. This process will consider internal and external candidates. We will update the market as appropriate," a spokesperson said.

The nominations committee is expected to choose from a cluster of executives that includes CFO Elhedery, wealth business head Nuno Matos, Europe boss Colin Bell, and investment bank chief Greg Guyett, according to media reports.

Chairman Mark Tucker is also due to stand down by 2026."It certainly is unusual for a large bank such as HSBC to go through three major changes in such rapid succession," said Octavio Marenzi, CEO of consulting firm Opimas.

The changes follow Quinn's reshaping of the bank in which he dropped underperforming businesses in markets such as the United States, Canada and France and trimmed upper management ranks.

A pressing task for his successor will be to revive the bank's shares. Since Quinn took over in August 2019, HSBC stock has gained just 4%, lagging a 54% surge in a European banking sector index and an almost 14% increase in a UK sector index.

RIGOROUS SELECTION

HSBC reported record annual profit in 2023 of $30 billion, but challenges remain.

It faces mounting geopolitical tensions between Britain and China, which together account for more than half its profit, as well as a forecast fall in global central bank interest rates, which had propelled its revenues higher as they rose.

"There are not many candidates to lead the company who will have the two essential skills of managing both politics and people," said a second investor, who declined to be named in line with policy on commenting on CEO selection processes.

Those passed over for the role in the past have sometimes left the bank.

Former wealth business head Charlie Nunn, seen as a CEO contender before Quinn got the job, left in November 2020 to become CEO at Lloyds, a former senior executive said.

A spokesperson for Nunn declined to comment.

By highlighting the bank's top talent, the process also makes those not selected potential targets for headhunters, the former executive said.

Reuters was unable to verify the size of the financial incentives under discussion.

"Pay increases for better retention under the C-suite would be a good thing," a third HSBC shareholder said.

"It is really important to ensure some stability and continuity for the bank given the CEO transition."

Ping An Asset Management, HSBC's largest investor, declined to comment.

Kyle Samuels, CEO of Creative Talent Endeavors, which advises banks and venture capital firms on how to retain top staff, said internal promotions can be complex.

"The Chairman needs to communicate the decision transparently and offer significant new roles or projects to keep those not selected. Immediate recognition and rewards can also help," said Samuels, who is not currently advising HSBC on its process.

But the appointment of an insider could help the bank stay on track, some analysts said.

"Whilst it is relatively rare for a bank to change all three of its Chairman, CEO and CFO in short succession, for HSBC if the CFO does become the CEO it will provide some degree of continuity," said RBC Capital Markets' Benjamin Toms.

($1 = 0.7788 pounds)

(Reporting by Sinead Cruise and Lawrence White; Editing by Elisa Martinuzzi and Mark Potter)