Has the HSBC leadership been betraying signs of elements of hubris in the management of its world banking strategy, and has Barclays Bank, in a flagrant contrast, been achieving brilliant operational results in the deserved blowing up of its share price?
The words of some of the European Union's greatest titans merits the use of a word derived from Greek tragic drama, namely hubris, which implies over-confidence and arrogance, which calls forth disaster. Can anyone doubt that the statement hardly a year ago by a top HSBC executive on the inadequate performance of his economic research staff smacked of arrogance?
This must have had an enormous, demoralising influence on the very men from whom he was expecting results. What he got in exchange for his unkind words was a ripple negative effect in the world's financial media, which reached its culmination in the publication in the business supplement of the Sunday Times of London of a heavyweight article titled 'Stock Prickers of the Year' by Matthew Goodman, which demonstrated beyond doubt that small independent brokers held their own against the big investment banks. HSBC did not feature at all in the following table.
The outstanding performance of the world's smaller financial organisations could not have been a matter of coincidence, for students of economic history have known for more than three centuries that the whole stock exchange game has always been more a matter of brains than of deposits.
Rothschilds cannot by any measure equal the financial clout of an HSBC, but that name is still the most famous in world banking, despite the fact that it is now relatively a small institution.
It is not by chance that we mention the name word Rothschild in this context, for the absolutely brilliant performance of Barclays during these last months as compared to HSBC owes much to a man who definitely feels he must equal the Rothschild prowess in his chairmanship of Barclays. He is Marcus Agius, who in this country needs no introduction.
Mr Agius is by marriage, and even more by merit, a part of the Rothschild banking universe. It would be silly to call it a circle, for Rothschild is still a world power in banking and politics far beyond that suggested by that family's display of modest living and high thinking. It is a name which breathes power in the very highest quality media.
In the not so distant past that house was responsible in no small measure for creating the hub of Zionism, which is the state of Israel, and for ensuring by its influence on world affairs its survival and robust continuation. The sudden burst of brilliance in the Barclays performance under the recent leadership of Mr Agius gives you the impression that some sort of Rothschild alchemy is at play.
Has Mr Agius the ambition to be labelled the ablest Rothschild of his generation? If he has, as I suspect he has, he has every right to indulge in it, for through its manifestation he is working to make other people rich. This ensures for himself a load of anxiety and hard work, which is a sure way to cut short one's lifespan. The world should be beholden to hardworking bankers, for commerce, as the Russians and the Chinese have come to realise and practise enthusiastically, is the golden girdle which bestsrides the globe.
No economic trouble
The recent losing streak in the world HSBC share price follows a strong rally after having triumphantly overcome the terrible uncertainties of the communist takeover of Hong Kong. I must confess I had HSBC shares at the time, and I have had no reason to be sorry, but to be extremely pleased. I hope I see a repeat performance with my present smaller holding.
As everybody knows, I welcomed HSBC to Malta enthusiastically in the press, even if this meant taking up a political stand, which I have always avoided. If this article does carry hints that I suspect HSBC to be suffering from hubris, I offer my apologies, and kindly request all concerned to examine whether my closely followed financial journalism over the past 15 years has made me cocksure even if it does not amount to actual hubris.
I have had recent incontrovertible proof that the HSBC performance in Malta has important international watchers. A tangible proof was delivered to me by an economic organisation in Madrid.
It is doubtless that there is at present widespread heavy disillusionment over certain investment products based on the Chinese economy, which HSBC marketed in this country most actively for these past two and a half years. What is less easily understood is that the losing streak in the international HSBC share price, which is by no means a reflection of its splendid financial ratios, is definitely the cause of the present poor performance of the Malta Stock Exchange.
HSBC has made an enormous contribution to the prodigious advance of the Maltese economy since the inception of its activity. Its present negative impact on the MSE is a different matter altogether. Stock exchanges have never been in the history of economics, accurate, or even partly accurate mirrors of the real side of the economy.
The Bloomberg stand
Bloomberg and the Daily Telegraph has certainly taken a stand on the defection from HSBC of its top man in the Asian market. This news has been repeated on that screen several times during the last 30 hours. It comes in line with what the Sunday Times stated on last week: "Over the past couple of years, we have seen some of the bulge bracket banks question the economics of their research departments, with the result that some of the older, more experienced analysts have been encouraged to move on."
On Tuesday, Bloomberg gave details of a most important HSBC defection - "Australia and New Zealand Banking Group Ltd hired HSBC Holdings Plc's head of Asia, Michael Smith, as chief executive officer to drive expansion in the region where the bank plans to double investment. Smith, 50, replaces John McFarlane, who ran Australia's third biggest bank for a decade.
"The 29-year HSBC veteran is based in Hong Kong and was previously posted in Argentina, where he was shot in the leg during an ambush in 1999. A successor will be announced in due course, HSBC said."
A buying opportunity
These defections are euphemistically called resignations, but to regard them as being run-of-the-mill bank happenings is a misinterpretation of facts. Most emphatically they are not, and they signal serious personality clashes in the top echelons of HSBC. They do however in a paradoxical way provide an outstanding buying opportunity.
Barclays' bull share price performance, in contrast to HSBC, is evidence of astute, powerful leadership. It is less evidence of powerful artillery than of a brilliant strategist at the helm. It had its great troubles 15 years ago when it squandered a Lm500 million rights issue.
It is now perhaps the time to buy HSBC shares, which can possibly explode, reflecting its massive underlying strength. This will certainly happen if some of its proven ineffective bankers are pensioned off. Bankers who have a tendency to make stakeholders strongly dislike them have no chance to push a bank's fortunes.
This is not investment advice but cultural background for the building of an investment decision.
The Daily Telegraph reported on Wednesday:
"HSBC was dealt a serious blow when Michael Smith, the veteran head of its Asian operations, quit to join one of Australia's biggest lenders."
The Financial Times stated last Wednesday:
"Mr Smith, who joined HSBC in 1978, is one of the most senior executives to leave for a rival in recent years. HSBC has been under pressure over its exposure to sub prime mortgage market in the US, prompting accusations that it has taken its eye off the ball in Asia."
Observer in the Financial Times noted:
"Smith's stint in the Argentine capital coincided with the 2001 financial meltdown, during which he was shot in an apparent kidnapping attempt, besieged by rioters in HSBC's Buenos Aires headquarters and put into legal jeopardy by vengeful politicians. The career HSBC banker once described the experience as the 'banking' equivalent of Stalingrad."
John Azzopardi Vella has promoted the Malta Development Fund and advised S&P. At present he is an executive manager with DBR Investments Limited licensed by the MFSA. johnazzopardivella@hotmail.com.