HSBC is thinking of increasing bonuses. This is who should get them
If it likes you, HSBC does not pay you badly. Last year it paid senior bankers who were material risk takers $1.4m each and some were pleasantly surprised although others quickly went on their way due to possible disappointment.
This year, HSBC might pay a bit more. In its first half investor presentation today, the bank said it "may consider increasing variable pay." CEO Georges Elhedery, said this consideration will occur at the end of the year.
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Given that we are around five months from the end of the year, it's notable that Elhedery has flagged this potential consideration now. Ostensibly, he did so to prepare investors for a "modest" increase in HSBC's costs. Equally, though, he might be signalling to HSBC's people that they should stick around. Barclays is increasing bonuses, after all, and their heads might be turned.
Who should get the higher HSBC bonuses if they are forthcoming? HSBC's debt capital markets (DCM) originators have long whinged about being overlooked in favour of syndicate bankers and might benefit from more love. Bankers and traders at the London non-ring-fenced bank, who increased profits 63% year-on-year in the first half to $805m might feel entitled to something; so too might people in the US business, where profits more than doubled to over $500m. At the main Hong Kong entity, by comparison, profits were down 1.3% in the investment bank over the same period.
Revenues in HSBC's investment bank were less impressive in the first half. Globally, investment banking revenues were up less than 1% in the six month period, and sales and trading revenues were up less than 4%. Most rival banks achieved comfortable high double digit percentage increases. However, HSBC has been "simplifying" its business, closing its M&A and ECM businesses outside of Asia and the Middle East and ejecting various members of its equities business, so a comparative shrinking is inevitable.
While it considers increasing bonuses, HSBC is also cutting costs. The bank said today that it now intends to increase its restructuring savings to $2bn from $1.7bn currently, and that these will be "actioned before the end of the year."
Some of the costs cut so far have come when people have left HSBC of their own accord, but Elhedery said today that the new cuts will also come from opportunities to save money. The implication is that more people may be cut before bonuses are paid. These people may be in areas like onboarding, KYC, credit workflows, contact centres, and legacy products, where HSBC is having great success in introducing AI.
The bank is not only thinking of spending more money on bonuses. It's also spending an extra $100m on branch security and other things "given the heightened risk environment."
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