Following is the transcript of an exclusive CNBC interview with Mark Tucker, Group Chairman of HSBC. The interview was broadcast on Managing Asia on 23 February 2018, 6.30PM SG/HK time.
All references must be sourced to a "CNBC Interview'.
Interviewed by Christine Tan, Anchor, CNBC.
Christine Tan (CT): Your first task as Chairman was to appoint a Chief Executive. What made you decide that John Flint was the right person for the job?
Mark Tucker: I mean this was a vigorous process. We went through in a lot of depth. I think the first part of that was just thinking about what capabilities we wanted for leadership.
Stuart Gulliver's done a fantastic job in the incredibly difficult and challenging period. I think if you look at the external environment, you look at the regulatory pressures, I think Stuart's done a really fantastic job. We want to just think again about the future and we wanted to map the capabilities that we wanted in the chief executive and John came out against those capabilities exceptionally well. He understands the business, he's a young man. He still is in his 40s but he's got vast experience both sides of the balance sheet, vast experience geographically, understands the company very well and understands the footprint again exceptionally well and he's excited about what can be done in the future and the potential of the organization.
We looked at external candidates, I looked at, and talked to a number of external candidates, we looked at internal candidates. I think there were some really excellent people we saw. But I think again looking at, where we got to John is, he was by far the best candidate. And I know he'll do, will do a great job for the organization.
CT: The bank's previous management spent the last seven years shrinking, restructuring the bank. Is the exercise now completely over? Any more asset disposals, any more job cuts?
Mark Tucker: I think this is always dynamic. I think your strategy evolves in a dynamic environment and therefore must be dynamic by its nature. So I think we'll continue to look at the things we do. John is sitting down now working with his executive team, working with the board to look at the strategy, to look at the optimal strategy for the future. And then when we've gone through that we'll come back and John will come back and tell the market about what, what we intended to do.
But we have a business that is performing well. We have a strategy that is working but are there opportunities to get greater clarity and do things better. The answer is yes. And I think that's where we see, we see the excitement. And I think when you listen to the results and the presentations yesterday, I think you heard about the opportunities that we have and this group has the business model, the positioning, the opportunity and we are, we think, uniquely placed to take advantage.
CT: So are you saying the restructuring is still not done. There's some room to further improve operations within the bank?
Mark Tucker: I think that's, Christine, that that's or in any company I've ever worked. I think the moment you say there's no room for improvement, then it's probably time as chief executive or chairman you should go. There's always room for opportunity, always room for improvement.
CT: Well most of the hard work is done, how will you now work with CEO John Flint to evolve the bank's strategy?
Mark Tucker: This is a partnership. I think John and I are very clear that we're working together to be able to support the next chapter, a growth chapter for HSBC. My focus as Chairman is really around strategy, is around people, is around governance, those three areas.
John runs, will run the company on a day-to-day basis work with the board in terms of the strategy and then go and deliver it and our job is to be able to support John in that delivery.
There's a whole lot of elements of people to ensure again the succession processes, development processes that people are focused on, and we can bring in people, we continue to bring in people from the outside, continue to develop our own people for the future. And then there's the whole element of governance, the governance of the organization, the size of the board, the composition of the board, the composition of board meetings, the venue, the committee structure, all of these are things are, are things we're thinking about and working on.
CT: Any changes you're hoping to make to the rest of the management team?
Mark Tucker: I think that's a decision for John to make, I think over time any new chief executive that comes in needs to assess and ensure that the people are, will be the right people for him and that organization. John will do that over the coming weeks and months.
CT: HSBC's foray into the US has been difficult in the last couple of years given its paid billions of dollars when it comes to fines, penalties related to money laundering, currency rigging. As chairman of HSBC, what are you doing to improve compliance standards within the bank? Where are you looking to tighten controls?
Mark Tucker: I think this is a, this has been an evolving process for five or six years, the Fair Prosecution Agreement was in 2012 and I think from that time on, the group's focus on financial crime compliance has been immense. I think that was, that focus, that intensity was effectively shown by the lifting of the fair prosecution agreement in December, I think which shows the progress that had been made.
But this is a process that never stops, we must be world class in our financial crime compliance activities, we must be world class in thinking about how we can look after our customers, all of these are areas that are of immense focus and concentration for the group.
CT: Where are you looking to tighten controls as a result?
Mark Tucker: I think this is across the group, when you look at the expenditure, we have many, many thousands of people we spend billions of dollars each year on compliance and ensuring that again this is an important area of focus. We must be able to look after our customers. We must be able to protect our customers in every possible way. And you know whether it's organized crime, whether it's rogue nations, whether it's individual criminals, their ability to innovate is remarkably fast and we must be able to understand, anticipate and be able to look after our customers in that environment.
CT: The bank has said that it could face penalties exceeding 1.5 billion dollars from investigations into its Swiss private bank unit. Are you hoping to make more provisions as a result?
Mark Tucker: I think the, the group is pretty well provided for at this point in time, there's nothing that we see out there that we don't know about or hasn't been provided at this time…
CT: So you have made provisions?
Mark Tucker: Ya, I think all of the, for all of these whether they're loan impairment charges or whether they're provisions for legal actions, I think the group was conservative in its provisioning.
CT: HSBC has also made some costly acquisitions in the U.S. in the past couple of years. It had to write down something like 14 billion dollars when it bought over household to cover losses in subprime. Any lessons there for the new management when it comes to making future acquisitions?
Mark Tucker: I think we've got to learn from the past. But I think again we've got to ensure that we futureproof this organization. We are clear again for the future where we can best compete, how we can best compete, where the profit pools are, geographically. The U.S. is an exceptionally important market for us as clearly as is Asia and as is Europe. But I think the group will continue to think about how best to position itself.
CT: So what is the group's acquisition strategy?
Mark Tucker: I think this comes as, acquisition strategy is almost a contradiction. I think we've got to decide fundamentally where we want to compete, how we want to compete and then if, if and when we decide that, we then think about how we best deliver that. M&A is one delivery mechanism, there are many others.
CT: Still on the U.S., last month in Davos, you had the privilege of having dinner with President Donald Trump. You were the only banker to do so. What was the meeting like? Was it useful? What did you guys talk about?
Mark Tucker: I mean the U.S. as I said is a very important business for us. I think the president was clearly interested in our U.S. business and other activities that we were engaged in. It was a valuable meeting, it was a meeting of 13 or 14 senior executives from a particular European focused chief executives. And this was just valuable in understanding what he was doing and how he was thinking. We had a number of his, a number of a senior team were there. So it was a valuable evening. But part of the sort of ongoing discussions with senior leaders across the world, we're a global business and we must stay on top of global issues.
CT: The much talked about Trump tax cuts. Does it somehow alter your U.S. strategy when it comes to expansion?
Mark Tucker: No, I think again there are a number of things to be worked out. But ultimately with corporate rates cut, this has to be a good thing on an ongoing basis. We've got losses we've got to use up, we've got to ensure the greater profitability et cetara, but ultimately it must be a good thing that the tax charges come down.
CT: Seventy-five percent of the group's profits now come from Asia. As chairman, given your deep insights into the region, what are you doing to further strengthen the bank's pivot to Asia?
Mark Tucker: I think if again this part comes out of the strategy work that John and his team are doing now. But I think as you say I have an enormous passion for Asia and belief in the Asian century, in the Asia Pacific century and the significance I think world growth will come fundamentally from two places over the next 25 to 30 years. And Asia is key to that.
So we must as a group given our history, given our positioning, given our financial strength must continue to invest significantly and heavily in Asia.
CT: You're well connected here in the region. You opening any doors for the bank here?
Mark Tucker: We have many old friends and I think it's always a delight and pleasure to see them and if we can work together on business as well then that would be wonderful.
CT: Are you happy with the bank's footprint in China?
Mark Tucker: Yeah, I think we have a very clear focus on the Pearl River Delta where in the 26 prefectures that comprise the delta, we have 64 branches focused in that area. We can continue to try to build our China business as we are intending to do but we're wonderfully well placed and I think it's now getting down into the depth. I think you know we got the first majority-owned securities license in Qianhai securities gained the end of last year first with Panda bonds. We have a number of firsts and clearly Belt and Road is one of that where we were voted the best Belt and Road Bank with the best Belt and Road project, the railway in Malaysia. So I think there's a whole lot of opportunities for us China, China-related and I think again China will continue to be a very, very important part of our future.
CT: When it comes to what's happening over in China, lots of concerns about growing debt problems. Is this something you're watching carefully as chairman of HSBC?
Mark Tucker: I think we watch everything but we look at it in context, I think having been in the region for well over 30 years personally, and clearly the organization for a 150 plus years I think we have some understanding and some insights and we understand the fundamental strength.
There're always going to be challenges and issues across the region in individual countries but looking at these things over long periods of time and looking where success is, China has done an excellent job of, of economic management and our belief is that will continue.
CT: So are you ruling out a hard landing in China?
Mark Tucker: I think the answer is yes. I think we think growth next year will be six point six, six point seven and we think in 2019 will probably be six point seven, six point eight. So we are we are confident in China's future.
CT: So you want to be the bank in China?
Mark Tucker: One of the, I think clearly the domestic banks, there are some very strong, very powerful and some very good domestic banks but nobody has the international footprint, nobody has the international trade corridors that we have, the 76 countries that we operate in and the ability to connect from individuals all the way to large corporations right across the business model HSBC is absolutely unique in that.
CT: And so you want to be the top global bank in China?
Mark Tucker: The top global bank of China will be a good ambition. I think we are today and I think we would want to be that on a continued basis.
CT: In 2017 the Bank delivered an ROE of 5.9 percent. Now the bank is targeting more than 10 percent ROE in the medium term. Can you define for me what medium term is and could it happen sooner?
Mark Tucker: I mean, I think, your medium term, I think is any definition of sort of three to five years. I think the aim and ambition is clearly to get to that 10 percent and exceed that level. It depends on a lot of external circumstances as well as for the internal. Our aim is to focus on delivery of that. And that's really where we'll go. I'm not going to give you a forecast as you know, well, I think we set that out as a target. And we take those targets very seriously.
CT: But do you want to achieve that under your watch as chairman of HSBC?
Mark Tucker: Absolutely, absolutely. I think that's, I think you know we want to get on with things, I think we know what our ambition is, we know what the opportunity is, we now need to be able to deliver that.
CT: You're very ambitious.
Mark Tucker: Always. Justifiably, I think when you, when you're part of an organization like HSBC which has the history, has the financial strength, has the reach, has great people and great relationships, then you must be ambitious.
CT: HSBC is a 153 year old financial institution with headquarters in London. Given all these concerns about Brexit, can you confirm for us where they are still moving 1000 jobs to Paris?
Mark Tucker: I think to be clear, I think the most significant thing for us in Brexit is being able to look after our customers and to be able to guide them through a journey, and the Brexit journey, there are still many uncertainties. The December agreements were positive, discussions can now go into transition in the longer term trade agreements but there's still a way to go. Our role is just to be able to guide our customers through that. At the end of it when Brexit happens, we must be able to support our customers, our European customers. We cannot support those customers from the UK again that will be banned under the agreement so we must support them elsewhere. We'll move those jobs to, likely to France where we have a very significant subsidiary, we have 10,000 or so people in our French subsidiary. Instead of the center of Europe for us being the UK, we'll just re-branch a number of the different countries out of France. It's a fairly, well, it's a fairly simple process for us. So I think it's where the jobs go and the job here is servicing EU nationals. We'll move those jobs. But again there's, the urgency for us is not as great as it is for others who don't have the European subsidiaries already.
CT: So you will move the jobs to Paris? 1000 jobs to be exact?
Mark Tucker: We haven't. I mean again we've given, I think, up to a thousand rather than a thousand. My sense is it'd probably less than that but I think that it's that sort of number.
CT: As chairman of Europe's and Britain's largest bank, anything you want to say to Prime Minister Theresa May and the MPs about how to ensure a smooth transition?
Mark Tucker: I think they, they've got a very difficult and challenging job and I think they, that they get plenty of advice and I think the advice is better done privately than publicly.
CT: But if you had a chance to talk to them, what would you say?
Mark Tucker: Oh I think we, we spend time with all the senior leaders of the countries we operate in and I think again those are much better private phone conversations than they are public.
CT: So you have been talking to Prime Minister Theresa May?
Mark Tucker: I have.
CT: Given fears of a Brexit, do you think London can still remain one of the world's top financial institutions?
Mark Tucker: Absolutely, I think London is a world class center difficult to replicate in many senses. That has happened over many, many, many years and I think it will take many, many years for that to erode. And in the meantime, we've got to be positive, we've got to be constructive, we've got to find ways to ensure that the London and the UK remains a world class financial center and the government and I think the regulators both understand that well.
CT: Well Asia now makes up 75 percent of the group's profits. Does it still make sense for HSBC to be headquartered in London?
Mark Tucker: Yes, it does at this point in time, it makes good sense to do so and I think we'll continue to look at that over time but absolutely no changes at this point.
CT: Well, the idea of shifting headquarters to Hong Kong was rejected a couple of years ago. Could the option come up under your watch as chairman?
Mark Tucker: There's no reason at this point to reopen that.
CT: So as chairman where are you based exactly?
Mark Tucker: It's a good question. It feels like 40,000 feet up in the air but I think it's a mix. I'm in London mostly but I think with substantial time in Asia and globally. This is a global business and I think I've always believed you need to be out and about in that business and seeing people in countries, seeing the politicians and the regulators across the world. 40,000 feet up in the air is probably the best description.
CT: So where is home exactly, if you were not in the air but on the ground? Where is home exactly?
Mark Tucker: London is, that London, now our new home for this point in time.
CT: As chairman, you're now working closely with CEO John Flint to run the bank, you've inherited a stronger and leaner bank as a result. In terms of leadership, what exciting things can we expect from both of you?
Mark Tucker: Well I think it's John's first day. So I think we, this is an enormous organization but he knows it well. And I think he's determined to ensure that the next chapter is a chapter of growth for the organization. We've had a challenging last six or seven years, the business has grown. And as you say, there's a lot of re-simplification of the business has happened, but the opportunities for the future are immense, but I think we've got to think positively, constructively. We've got to look at the opportunities and we know that we can compete. I think in some areas we're punching below our weight and we need to get to our weight and above it.
CT: Do both of you get along? What's the chemistry like between both of you?
Mark Tucker: The chemistry is excellent because I think this was part of the interview process. I think what's important in my mind to the chairman-chief executive relationship is a relationship of trust and of openness and that is fundamental to ensuring that as an example for the rest of the organization.
CT: You spent many years running AIA as CEO. You are known for a growth oriented, hands-on, no nonsense direct approach. As chairman of HSBC, are you hoping to inject a fresh way, a new way of doing business within the bank?
Mark Tucker: I think the bank has been remarkably successful over 153 years as I say, I think the most important thing is ensuring that we can take the bank to the next level over our stewardship. So it's not about the individual. This is about doing what is best for the bank at this point in time and I say that I think the bank is the best positioned bank in the world, the best positioned financial services organization in the world for the opportunities ahead, both for John and I, our intention is to be able to deliver behind that.
CT: The Bank has been described as being slow complex and bureaucratic. Is this something you're looking to improve?
Mark Tucker: Yeah, I think we've looking to in the governance side, particularly looking to simplify, looking to demise some of the committees, looking to reduce the size of the board, looking to refocus different areas, all of these will have consequential effects through the organization and John himself is doing some work about, thinking about how we can be more efficient and effective. So these are areas that I think we are aware of and we can do better in that we will.
CT: And finally, you spent many years running AIA as CEO now chairman of HSBC, is life still pretty hectic for you?
Mark Tucker: Yeah, life is very hectic. I think I learnt a long time ago that wasn't the job that was probably the personality. And I say coming to this and being in this part of the world is always exhilarating, is always thrilling, is always energetic and I'm delighted to be able to be part of that and to come back to Asia as regularly as I do.
CT: Given the amount of time you spend in the air and traveling for business, any time to pursue your passion for football?
Mark Tucker: There is time, there's always time for football. My team are, are doing okay but …
CT: My team meaning?
Mark Tucker: Chelsea, of course. But we can also do better. But I think the aim is also in both cases to be the number one in the world.
CT: So you set a target for Chelsea as well?
Mark Tucker: Absolutely.
CT: What impact would you like to make on the bank in your tenure as chairman of HSBC?
Mark Tucker: I think it's again about sustainability. I think to continue to ensure the bank is on the right track, to take advantage of its incredible assets, of its geographical footprint, of its people, of its financial strength and of each of its reach and its business model. I think if we can support the next level of its growth and really take the bank to where it should be, I think that will be a successful term.
CT: Mark, thank you so much for talking to me.
Mark Tucker: Always a pleasure.
CT: It's been a pleasure. Thank you.
Mark Tucker: Thanks Christine.