HSBC Holdings Plc is embarking on a radical overhaul while it continues the hunt for a permanent chief executive. For investors, the strategic muddle of this bizarre situation should be at least as troubling as the stinging cuts, $7.3 billion of charges and suspension of buybacks that the bank announced with its earnings Tuesday.

The London-based lender will cut as many as 35,000 jobs, reduce gross assets by more than $100 billion by 2022, shave annual costs by $4.5 billion and slash the size of its investment bank in Europe and U.S. in the biggest raft of changes for years. All this will be overseen by Interim Chief Executive Officer Noel Quinn pending the appointment of a permanent successor to John Flint, who was ousted last August.

Quinn was left to present the plan even as HSBC declined to confirm him in the job. This is bad on two levels. First, it undercuts the authority and investor confidence that Quinn might otherwise be expected to enjoy, should he eventually be appointed. At the very least, the delay signals that the board has harbored doubts about his suitability. Second, going ahead with the revamp may impede the search for a replacement.

Any chief executive worth his or her salt will expect to put a personal stamp on the company. But the biggest decisions have already been made. This reshaping will have Quinn’s fingerprints all over it. That may narrow the options for HSBC Chairman Mark Tucker. Stephen Bird, Citigroup Inc.’s former top executive in Asia and the leading external candidate for the job, already has ruled himself out, the U.K.’s Sunday Times reported last weekend, citing unidentified sources.

HSBC might argue that waiting wasn’t an option after years of sub-par performance. “Parts of our business are not delivering acceptable returns,” Quinn said in Tuesday’s statement. HSBC will shift resources to higher-returning markets, while squeezing the cost base and exiting some business lines. “The current strategy is in no man’s land,” as one investor told Bloomberg News pre-earnings.

No one could accuse HSBC of sparing the knife this time. The job cuts are equal to about 15% of the workforce. They’re also an answer to those who, like this writer, have criticized the bank for being overly timid in the past. Still, the overhaul may end up exacerbating some of the vulnerabilities they seek to address.

The restructuring makes the bank even more hostage to the fortunes of Hong Kong and mainland China, two economies struggling with slowing growth aggravated by the coronavirus outbreak. Hong Kong was already the source of 90% of HSBC’s profit in the third quarter. The city is going to become an even more glaring presence in its books.

Besides an economy in recession, competition is getting tougher for HSBC in the city, as online lenders backed by Tencent Holdings Ltd. and Alibaba Group Holding Ltd. prepare to launch this year. Hong Kong’s dominant bank has also had to navigate political minefields, including being the target of the public ire last year after it closed an account linked to pro-democracy protesters.

China, meanwhile, remains a challenge. HSBC is still struggling  to extricate itself from Beijing’s bad books for providing U.S. prosecutors with information that led to the arrest of Huawei Technologies Co.’s  chief financial officer in late 2018. And disruption to supply chains from the virus outbreak may lead to more credit losses, the bank has said.

That means it’s going to take a long time before HSBC achieves the returns Tucker seeks. While 2019 adjusted pretax profit of $22.2 billion beat analysts’ estimates, HSBC’s fourth-quarter return on tangible equity was a mere 8.4%. That’s much lower than the more than 11% target it abandoned in October. Even its new goal of 10%-12% by 2022 looks unambitious beside the 18% return of JPMorgan Chase & Co. HSBC shares closed 2.8% lower in Hong Kong after the earnings, the biggest decline in more than a year.

Ultimately, HSBC’s biggest risk may be that Quinn’s cuts cause the lender to double down on greater China just as growth in this part of Asia is uncertain. Outside CEOs won’t be clamoring to steer this ship. Quinn may just be stuck with the job. 

To contact the author of this story: Nisha Gopalan at ngopalan3@bloomberg.net

To contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.net

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

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