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

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

For seven years, Stuart Gulliver was HSBC Holdings Plc's cutback supremo. In the last two, he was also the bank's buyback king. Incoming Chief Executive Officer John Flint has to borrow both those hats from the outgoing boss. Plus, he needs to wear a third -- relocation agent. 

With HSBC posting a third straight quarter of rising revenue, the once-embattled lender is now firmly on a path of gains after five years of declines. Adjusted revenue reached $13 billion for the three months through September, HSBC said on Monday. 

It's no time to get off the treadmill. Gulliver has shrunk risk-weighted assets by a fifth. However, with total assets at more than $2.5 trillion, HSBC still has one of the world's largest balance sheets.

The flip side of shedding flab entails returning excess capital to shareholders. HSBC has pledged to buy back $2 billion of shares in the second half, bringing buybacks in the past year to $5.5 billion. While no further commitments were forthcoming in Monday's results statement, there's plenty of room to keep the largess going.

Elephant Rising
While HSBC's overall balance sheet is still bloated at more than $2.5 trillion, shedding of risk-weighted assets under CEO Stuart Gulliver appears to be over
Source: Bloomberg, company reports

Passing the U.S. Federal Reserve's stress test in June has cleared the way for billions of dollars to be repatriated from the U.S. operations, and returned to shareholders. That anticipation is the main reason why HSBC is now trading at 1.2 times estimated book value, better than most other European banks.

Turnaround Play
HSBC shares have soared this year
Source: Bloomberg

To those two imperatives, Flint needs to add an extra Asia pivot.

Asia accounted for 70 percent of HSBC's adjusted pretax profit in the first nine months, versus 68 percent a year ago. Increasing this further would inevitably mean larger exposure to China. The country's credit bubble may still burst in unpredictable ways, but at least the economy is looking more stable than in February last year when HSBC resolved to keep its base in London. That decision followed 10 months of deliberations over whether to shift its domicile, perhaps to Hong Kong.

The city of its birth, and the bank's home until 1992, is where HSBC earns most of its profit. Too much competition for mortgage business may be eroding some of the former British colony's sheen, but it still presents a compelling case for a new base. Brexit-related uncertainty around London is undoubtedly a push factor, but there's also the pull of the Greater Bay area, a Beijing-backed urban cluster connecting Hong Kong and Macau with China's Guangdong province.  HSBC lent $1.1 billion more in Guangdong in the third quarter compared with a year earlier.

As crucial as geography will be a call on what kind of a bank HSBC wants to be. Global interest rates are beginning to stir from ultra-low levels after a decade-long funk. World trade is looking at its best year since 2011.

While all that's hopeful news for commercial-banking revenue, a glut of liquidity remains a more immediate problem.  Lack of volatility in asset markets crimped fixed-income and foreign-exchange trading revenue by 5 percent during the quarter. That, however, was a far more respectable showing than rivals. On Friday, Barclays Plc said fixed-income trading slumped 34 percent in the quarter, while it slid 30 percent at Deutsche Bank AG.

Flint, who takes over from Gulliver in February, has his plate full. Sustaining the London-traded stock's 20 percent climb in the past year will demand more near-term goodies as well as a medium-term strategy. So while preparing to move house, keep those buybacks coming.

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

To contact the authors of this story:
Nisha Gopalan in Hong Kong at
Andy Mukherjee in Hong Kong at

To contact the editor responsible for this story:
Matthew Brooker at