London-headquartered, finance multinational HSBC is a stalwart of foreign banking in Lebanon, and Executive has consistently inquired with its senior management over the years about the bank’s strategies and views on the country. Logically, we did not let the opportunity skip by to be the first to sit down and chat with Peter Yeates, the British banker who has just taken the baton from Francois-Pascal de Maricourt as the new chief executive of HSBC Lebanon.
What are your first impressions of the Lebanese business climate?
It has been an exciting four weeks since my arrival and my first impressions are that this is a busy place, there is a lot to do and people are extremely welcoming. I have a really good feeling about our customer base and our staff and the enthusiasm that we have for business. I am picking up from somebody who has built a very well-managed and profitable business and am looking forward to the future.
In today’s global banking terms, where risk-based capital and the Basel regulations are paramount considerations, how can a market like Lebanon remain interesting for a global bank of the size of HSBC?
In 2011, we came out with our new group strategy that is based around five filters to determine if we like a market we are in or a job we are doing. The first one is to have a decent return on equity. Lebanon has been a growth market and we have been able to generate a good return on equity. The group set a benchmark of 12 to 15 percent. We are able to generate return on equity in excess of that, which is important. The cost efficiency ratio is the second filter and the group set a target for 48 to 52 percent cost efficiency. This is an important target to hit and we are investing in places that have the revenues to justify the cost that you spend. Thirdly, you have to be able to generate your own liquidity. It is important to generate that deposit base in order to fund your lending and we have been able to do that.
What are the other two filters?
The fourth one is the size of the economy. The economy of Lebanon obviously is not the United Kingdom or the United States. But the connectivity of the economy and the connectivity of the business is the fifth filter and Lebanon has incredible connectivity around the world. In terms of being an international bank connected to the region and the world and being able to fund trade business and cater to individuals and businesses that have connections around the world, that is really where we have an advantage.
Is your recent experience in private banking with HSBC in Miami an advantage for working in Lebanon, particularly in the area of connectivity?
Definitely. I have been with the bank for 29 years. Having worked 14 years in Asia, seven in Europe, three in the Middle East and seven years in the Americas, that experience, I think, gives you that connectivity to the world. You know the group, you know the geographies, you know people and the business lines. I haven’t always worked in one business line either. This is an advantage for me and I hope will it help in connecting Lebanon to the world as well.
Does the Lebanese market in Africa play a role for HSBC?
Africa is a market where we have a presence but it is not our strongest presence. The Lebanese diaspora has a big presence there but it has an even bigger presence in Latin America where we are extremely well represented.
Are you free to disclose some numbers on how well you perform on return on equity and cost efficiency filters? Are we within the 48 to 52 percent cost ratio?
We are comfortable with where we are in Lebanon in terms of this.
You said you are above 15 percent in return on equity. Can you tell us the exact return on equity ratio HSBC Lebanon achieved in 2012?
We try to be in that space, yes. However, I am afraid that I have to say that we don’t publish those numbers.
A main concern for international banking in the Levant is in the area of sanctions and compliance with requirements coming from the US and the European Union. Do those sanctions regimes and restrictions change your proposition for value generation in Lebanon in any way?
Obviously our focus is to comply with all the sanctions and all the regulatory requirements wherever we operate. It applies to us here in Lebanon as it will apply to any entity in the group anywhere in the world. In Lebanon, we do have geographic proximity [to sanctioned countries] and there might be more of an opportunity to come across this sort of business, but we are extremely diligent to make sure that we meet all the regulatory requirements. We are conscious of the fact that we haven’t always been perfect and we definitely made mistakes. We need to make sure that we don’t make any more mistakes.
Do you have your own compliance department in Lebanon?
We have our own compliance department in Lebanon and we invested hugely in our governance structure around the world. Investment in risk and compliance clearly reduces operational risk.
Can you put some numbers to that investment?
We have increased compliance staff to more than 3,500 globally and spent over $290 million on remedial measures in the US as of the year-end of 2012.
Would it be fair to say the emphasis on global compliance involves a specific mandate for you in terms of supervision of governance and compliance here in Lebanon?
Absolutely. It is very key to us that we are fully compliant with the local regulations and with the global standards that we have set ourselves as a bank. We no longer run ourselves as federation of geographically distributed banks. We have a global standard and run ourselves along business lines and functions and do so much more today than historically.
Where, then, is compliance positioned in your ranking order of priorities in managing the operation in Lebanon when compared with targets such as increasing the customer base or improving financial performance?
I would put it as probably our highest priority that we are fully compliant, in line with the regulations, and that we have the highest standards and values in what we are doing. I think our stakeholders are very focused on investing in a well-run, well-governed institution that has the highest possible reputation.
As an international banker on your level, what makes Lebanon attractive in your career planning?
[One attraction is] having the opportunity to lead a team like we have here and lead a business that is doing well and is well established. To learn about the Middle East and its complexities, this is also a very interesting challenge and something that I always wanted to do. I am enjoying the challenge of being here. It is tremendous.
Coming here I passed a billboard where your brand was exhibited with a smiley face on a golf course. Does that imply that you are expanding into the leisure market, or are you targeting as customers mainly the kind of people who can spend the afternoon on the golf course?
This is our customer relationship campaign. It is based around making people smile. There are things in HSBC that will make you smile and you will find them just by having the relationship with HSBC.
So what makes you smile the most?
[Laughs] That is a difficult question. Me as an individual? I think friends, family, enjoying good moments with people that are both warm and open and friendly and trusting, challenging situations and overcoming challenges, those are the sort of things that make me smile. And working with a good team, with people that are engaged and actually enthusiastic about what they do.