Europe’s bank bosses under pressure

 Europe’s bank bosses under pressure

Bank bosses will be the subject of intense scrutiny when Europe’s earnings season kicks off this week.

Across the continent, executives are struggling to shake off lingering regulatory probes, shareholder pressure and boardroom bust-ups that could lead to further upheaval among the industry’s power players. 

Just over a year ago, the European banking sector underwent the biggest shake-up of its top ranks since the financial crisis. Following a spate of industry scandals, boards turned to a crop of low-key leaders.

But already questions are being asked about how long those replacements will last. Ongoing dramas surrounding some banks are proving an unwelcome distraction for those tasked with steering them through the biggest global crisis for a generation.

“During the coronavirus pandemic we need bank CEOs to be looking through their front windscreen rather than their rear-view mirror,” said Joseph Dickerson, an analyst at Jefferies. “This crisis has thrown up huge strategic opportunities and challenges for banks — CEOs must not get distracted.”

CEO tenure has varied dramatically at European banks since the crisis

Here are those in the spotlight:

Ralph Hamers, UBS

Ralph Hamers will present his maiden quarterly results as chief executive of UBS on Tuesday. But his future at the world’s biggest wealth manager is already in doubt.

The surprise decision by a Dutch court last month to reopen an investigation into his personal role in a huge money-laundering scandal at his previous employer, ING, threatens to derail his first year running the Swiss lender — even if he is exonerated.

The prospect of regular meetings with prosecutors in The Hague — combined with Mr Hamers’ aversion to air travel and restrictions amid the pandemic — only add to the potential disruption.

Ralph Hamers, new chief executive of UBS, is being investigated over his personal role in a money-laundering scandal at his previous employer, ING © Walter Bieri/EPA-EFE

Discussions have taken place among board members about potential replacements should Mr Hamers have to step aside. A person briefed on the talks insisted they were informal, and said the 54-year-old had the board’s full backing.

One top-20 shareholder described the situation as “surprising and annoying”. This person added: “The bad optics of money laundering matter a lot. The board should have known and they should have found somebody else. They are getting a free pass on this.”

Mr Hamers was handpicked by UBS chairman Axel Weber, and his appointment was given the green light by headhunters and Finma, the Swiss financial regulator. 

Despite having joined UBS nearly five months ago, with his first two months spent shadowing predecessor Sergio Ermotti, Mr Hamers has made just one public appearance so far. The Dutchman will not provide a strategic update this week to coincide with his first three months in charge, as analysts had hoped.

Jean Pierre Mustier, UniCredit

Jean Pierre Mustier may have left his role as chief executive of UniCredit by the time the Italian bank reports its full-year results on February 11.

When the 60-year-old former paratrooper announced last month that he was retiring from UniCredit after falling out with the board over strategy, he said he would leave no later than the group’s annual general meeting in April.

But Mr Mustier has agreed to step aside as soon as the bank names a successor, which the board hopes to do by the time it meets to sign off the results on February 10. It is a tight deadline given there is no obvious, baggage-free successor in a crowded field of candidates.

The frontrunner is Andrea Orcel, the former head of UBS’s investment bank, who has been out of work since leaving the Swiss lender for Santander in 2018. When Santander withdrew its offer because of a disagreement over pay and profile, Mr Orcel began a €100m lawsuit against the Spanish bank, which is due to restart in March.

Jean Pierre Mustier, chief executive of UniCredit, has agreed to step aside as soon as the bank names a successor © Jason Alden/Bloomberg

In order to take up the UniCredit post, the 57-year-old Italian would need to untangle himself from that high-profile lawsuit and potentially forfeit millions in deferred pay still owed to him by UBS. Mr Orcel is favoured by UniCredit’s international shareholders, who are drawn to his global banking experience and are increasingly frustrated by the board’s domestic focus and lack of tech expertise.

He is also the preferred choice of some Italian backers, including the billionaire businessman Leonardo Del Vecchio, a top-10 shareholder at UniCredit and an influential voice among its other investors.

But lurking in the background for any incoming chief executive is the prospect of UniCredit being forced by politicians to take over the beleaguered state-owned lender Monte dei Paschi di Siena — a deal heavily opposed by shareholders. 

“Every candidate for the CEO job has said that if the right conditions are met, they would pursue the takeover,” said a person involved in the talks. “But the board are scared of how shareholders will react.”

Line chart of Price-to-book (x) showing European bank stocks have traded below book value

Mark Tucker and Noel Quinn, HSBC

The duo atop HSBC have endured a chastening few years. Mark Tucker and Noel Quinn are under pressure from shareholders to show they can better harness the lender’s position in fast-growing Asian markets, while slashing costs and simplifying the sprawling behemoth.

Since Mr Tucker took over as chairman in September 2017 — firing his first chief executive within 18 months and installing Mr Quinn in his place — the shares have plunged 46 per cent. HSBC has also become caught in the geopolitical tensions between the US and China.

Mark Tucker and Noel Quinn are in charge of HSBC, which is cutting 35,000 jobs © AFP, Getty, Bloomberg

Alongside the bank’s results on February 23, Mr Quinn will unveil a second strategic refresh in as many years. This may include the sale or exit of its US retail business and a further shrinking of its struggling European operations and investment bank. The capital freed up will be redeployed in Asia, where it already makes 90 per cent of its profit.

HSBC — which employs 233,000 people in 64 countries — may also have to increase its programme of 35,000 job cuts, announced barely a year ago, as ultra-low interest rates and slowing global trade continue to weigh on revenue.

Mr Tucker said at a conference last week that “the world had changed” in the 11 months since its last strategic update. “Economic realities mean that what we were planning to do in February we need to be even more urgent in doing.”

Line chart of Share prices rebased showing UBS has fared better than some of its European bank rivals

Thomas Gottstein, Credit Suisse

Credit Suisse’s results on February 18 will cap Thomas Gottstein’s first year as chief executive, which has been a baptism by fire for the 57-year-old banker.

Mr Gottstein in December told the FT he hoped Switzerland’s second-biggest lender would start 2021 with a “clean slate” after his first year in the post was pockmarked by the fallout from a succession of embarrassing legacy compliance and lending failures.

But already this month the bank revealed it has had to set aside $1.1bn for legal costs related to US residential mortgage-backed securities, in addition to a $450m impairment charge on the value of its holding in hedge fund York Capital Management, which is closing down its European business.

As a result, Credit Suisse will post a fourth-quarter loss, despite strong performance for its investment bank in the final three months of the year.

Thomas Gottstein of Credit Suisse is hoping the lender will start 2021 with a ‘clean slate’ © Fabrice Coffrini/AFP/Getty

Further bad headlines are to come. Mr Gottstein rose to chief executive after his predecessor, Tidjane Thiam, was forced out following revelations of corporate espionage. A Finma probe into the affair is due to conclude this spring.

Meanwhile, Mr Gottstein’s main ally in the boardroom, chairman Urs Rohner, will be replaced by outgoing Lloyds Bank chief executive António Horta-Osório in April. Mr Horta-Osório will press his chief executive to close the gap on fierce Zurich rival UBS. “You can hardly accuse Antonio of being a pushover,” said a person who has known the Portuguese banker for years.

Frédéric Oudéa, Société Générale

As the longest-serving chief executive of one of Europe’s largest banks, Frédéric Oudéa’s future at Société Générale has been the subject of speculation for several years.

Last spring the French lender was hit by heavy losses as revenues in its equities trading division collapsed almost 99 per cent as a result of companies cancelling dividend payments during the early stages of the pandemic.

In the face of criticism that under Mr Oudéa’s leadership SocGen had become too reliant on complex equity derivatives products, the 57-year-old Frenchman said the bank would slash the risk being taken by the structured products teams. He has also set about closing 600 branches in an attempt to cut €450m of costs.

Société Générale’s Frédéric Oudéa is the longest-serving chief executive of one of Europe’s largest banks © Chris J. Ratcliffe/Bloomberg

SocGen is one of the worst-performing European bank stocks over the past 12 months, down 44 per cent. Its price-to-book value is less than half of its peers.

When Mr Oudéa presents the bank’s results on February 10 shareholders and analysts will be looking for signs that his risk and cost reduction plans are bearing fruit. Elsewhere, talks between SocGen and Amundi over the sale of the former’s fund management arm have cooled in recent weeks.

Though Mr Oudéa’s contract is due to run until 2023, the sudden availability of his former Ecole Polytechnique classmate Mr Mustier has reignited speculation over whether Mr Oudéa will see it through to the end.

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