HSBC’s Brendan McDonagh is a new breed of international Irishman.
Just six months after assuming his job as head of HSBC Finance in North America, Brendan McDonagh volunteered to appear before Congress, in March 2007, to address the growing subprime mortgage-lending crisis.
It was a typical move by the 49-year-old Irishman who has become known throughout his career for a straightforward type of management, which addresses problems head on.
Like many other banking leaders, McDonagh could have tried to duck and dive on the issue and refuse to appear at the televised hearings, but that was not his way. Senate Banking Chairman Chris Dodd was certainly appreciative.
“We take the situation very seriously and we’re taking strong steps to correct problems,” McDonagh told the legislators, and his bank directly proceeded to do that, seeking to ensure above all that a way was found for homeowners to keep their properties. “Otherwise everyone loses,” McDonagh notes.
HSBC had gotten caught up in the sub prime crisis after it purchased Household Finance in 2003, before McDonagh took the top job.
Last year, the company wrote off $11.7 billion in bad debt as a result of the crisis, but under McDonagh’s management the worst of the crisis now seems over.
The subprime segment is but a very small part of the global HSBC brand. Forbes magazine recently rated HSBC Holdings number one in its Global 200 ranking of companies worldwide.
The banking behemoth earned the distinction by showing a phenomenal annual 26 percent growth in revenues, by having 10,000 offices worldwide in 83 countries, and by having $2.3 trillion in assets.
HSBC is the little foreign bank that could. It started in Hong Kong in 1865 with just two branches, one in Hong Kong and one in Shanghai, capitalizing on the trade winds that were blowing strongly between the Chinese capital and the then crown colony.
At a time when the world center of banking was London, HSBC’s incredible growth since their modest colonial beginnings has been staggering.
As CEO of HSBC North America (the holding company for all of HSBC’s U.S. and Canadian businesses; the company serves nearly 68 million customers), McDonagh has no doubt that the bank has gone from strength to strength because of its global reach.
In fact, the Dublin native embodies the global nature of a bank that has managed to bestride the world. McDonagh’s stellar career in banking was foreordained from an early age. Born in 1958 on Dublin’s Northside, as a kid he showed an aptitude for numbers, which came in handy in the family business. His father was a butcher who supplied meat to the Guinness Brewery and the Rotunda Hospital.
“What we did in those days, because my father had a cash business, we would bring the cash home and I ran a ledger for him and then we would cash checks for our neighbors who were in the check business and needed to pay salaries and wages. So we ran a bank out of the dining room in the evening time,” McDonagh recalls.
It was no surprise when McDonagh took the economics and accounting route and went to Trinity College Dublin to study business and finance. Once he qualified and anxious to see the world, he sent his résumé out to several international banks and waited. It was 1979 and jobs were not plentiful in Ireland in the pre-Celtic Tiger era.
The best offer was from a vaguely exotic sounding company known as the Hong Kong and Shanghai Bank in London. His parents were surprised. “They were a little shocked when they realized it was based in the Far East and I wasn’t just going over to London for a job,” McDonagh remembers with a smile.
Thus began the journey from butcher’s boy to HSBC’s top job in America. McDonagh now oversees one of the top 10 financial services organizations in the United States, with assets totaling $557 billion and over 40,000 employees.
The journey to the top was one that would include living in eight different countries and developing deep cultural and business ties on several continents.
“A lot of us at HSBC have worked in many countries, and that richness of experience means that you have a deeper understanding, a global understanding, how things work in, and between, different countries,” McDonagh explained in our interview, which took place at HSBC’s New York headquarters on Fifth Avenue. “The foundation for us [HSBC] is free trade. Globalization, at the end of the day, is good for everybody,” he says.
McDonagh, who is now based at HSBC headquarters in the Chicago suburb of Mettawa, Illinois, worked with several developing nations early in his career.
“In those days we were headquartered in Asia and most of our operations were in the Far East and Middle East,” he explains.
McDonagh was in Guam for six months. Then he was sent to Brunei, in Southeast Asia. His first managerial position followed, in Hong Kong. It was quite an experience.
“We had a very large cash department. It was like mini Fort Knox, and I was the operations manager.”
Soon after arriving in Brunei, McDonagh met Kenane, an English nurse and midwife, who would become his wife. The newlyweds set out for Oman, McDonagh’s next posting, where he had to adjust to the life style of the Middle East after the years in South Asia.
His globetrotting pace increased when he was sent to Tokyo after Oman.
He enjoyed his time in Tokyo enormously. It was the first of two postings in Japan – the second came a few years later, when he was sent to Kobe.
In Kobe, McDonagh’s Irish roots and philanthropic leanings came into play. He helped set up the Irish Network of Japan which was an organization of younger Irish who were living in Japan.
“Actually, three of us set up a St. Patrick’s Night function in Kobe,” he recalls. “We got various people to sponsor – to buy the Guinness and whatever. We were planning to run it on the fly, but people came from all over – we were surprised by the numbers. We made a handsome profit and found, through a local priest, a Korean orphanage that needed support. There’s a large Korean population in Japan and they, largely, are less well-off. The event became so successful that it became an annual affair. I think the orphanage is still wondering who these crazy Irish people were who were dropping money off with them once a year.”
In 1993, McDonagh, on an upward trajectory, was transferred to London, thus ending his Asia sojourn. He says that he learned “cultural sensitivity” during his time overseas. “You value diversity, you value, and you recognize, the richness that each people can bring.”
Back in London, he was soon on the move again, taking over the company’s offshore operations in the Channel Islands before going back to London and joining the global headquarters staff.
He made it to head of strategy there before the call to come to the U.S. came. He was sent over to run the retail and commercial banking side of the U.S. business, which was based in Buffalo, New York. Soon he was made COO of the banking operation.
Then HSBC acquired Household Finance, one of the largest subprime mortgage lenders, but also one of America’s largest credit card companies. When the company began suffering under the subprime mortgage deluge, the search for a topnotch executive ended at McDonagh’s desk.
McDonagh moved to Chicago to become CEO of HSBC Finance and to deal with the subprime crisis, which he has done successfully.
In February this year, he was promoted to CEO of HSBC North America Holdings Inc., which oversees both HSBC Finance and HSBC Bank.
By now the McDonagh management approach was tried and tested. He expresses it this way:
“If you’ve got good ideas coming from your team, try not to stop them. Your job is to manage the bright people around you and to be comfortable and not be threatened by them. And if you can trust them, and you think they have a good idea, let them go for it.”
He is an innovator too. He and the bank leadership have focused on green technology and making the bank a carbon neutral one globally. He speaks with pride of how all the office buildings in HSBC will eventually conform to the highest green standards. Their new headquarters outside Chicago was recently featured in the New York Times because of its green focus.
It would seem counterintuitive for a bank chief executive to focus so intently on this issue, but McDonagh is a new breed of manager who realizes that green technology benefits everyone, as does good employee relations, another area he spends considerable time on.
When the subprime mortgage crisis hit, McDonagh worked hard to reassure his work force and deal with the problem head on.
“One of the first things I did was to go on the road. There are close to 3000 managers around the country, and I spent six weeks just talking to them. Explaining, ‘This is the problem, this is the size of it, this is what we’re going to do. You’re over here, look after our customers and meet our plan.’”
Many observers are predicting hard economic times ahead, and McDonagh himself sees the U.S. economy as being at a critical crossroads.
“I believe that parts of America are already in recession, but it won’t be that deep and it won’t be that long,” he says, adding reassuringly, “The American economy is very resilient.”
Ireland, always close to McDonagh’s heart, has changed enormously since he left, and he is glad for that. “It has become far more multicultural, which is a good thing. For decades, the world took the Irish in, and perhaps it’s our turn to take other people in. We owe them that. We are a very wealthy nation now, and we have to start to help others,” he says.
McDonagh does his part. He is involved with The American Ireland Fund, a philanthropic organization which supports cultural and educational groups in Ireland, and also, through Enterprise Ireland, he serves as an advisor for new Irish companies seeking to enter the U.S. market. His wife, Kenane, meantime, is involved in charitable organizations in the Chicago area, where their daughter Alison is in school. The couple’s son, Rory, following in his father’s footsteps, is studying economics at Trinity College, Dublin.
McDonagh, who sees the Irish economy as now going through a difficult phase after the heady days of the Celtic Tiger, believes a highly educated work force, preferably one that is flexible and multilingual, can help Ireland find that “sweet spot” in areas such as financial services, and keep the economy turning over.
His own accomplishment embodies that very successful aspect of the new Ireland – its ability to compete globally. As one of the first generation of the new “Global Irishmen,” Brendan McDonagh is an example of how much has changed since the days when the Irish left on Famine ships and were rarely heard from again.
He is living the dream of generations of Irish to better themselves abroad. Except in his case, he is proving it with one of the world’s truly global companies. With their combined global visions HSBC and McDonagh seem right for each other.