LONDON (BLOOMBERG) – HSBC Holdings’ chief executive officer Noel Quinn and his top lieutenants were forced to defend bonus cuts to unhappy investment bankers and traders after a year marked by hectic dealmaking and volatile markets.
On calls last week with staff at its global banking and markets division, Mr Quinn, along with the unit’s co-heads, Georges Elhedery and Greg Guyett, had to justify why the pool had to be scaled back at the only division that saw revenue increase last year, according to people familiar with the situation.
The executives told employees that the pandemic had eroded the bank’s overall performance and, combined with the stark economic backdrop, meant it couldn’t pay more, said the people, declining to be named detailing a private call. Even some bankers who gained top marks for their performance were told that their bonuses would be cut and that they shouldn’t expect a pay increase, they said.
A spokesman for HSBC declined to comment.
European lenders have been made acutely aware of the consequences of attempting to pay large sums to traders and bankers against the backdrop of the worst economic conditions in decades. Deutsche Bank scaled back plans for its bonus pool after the European Central Bank objected to proposed payout levels. UniCredit trimmed its 2020 bonus pool for top managers by almost half, complying with a request from regulators to exercise “extreme” moderation on compensation.
Bonuses are key in the investment banking and trading world, where star bankers and traders are often lured to competitors who can offer higher compensation. Bonuses at HSBC’s investment bank and trading division were down 15 per cent for 2020, according to the company’s annual report. This was in line with those in asset management and private banking, and less severe than in other parts of the bank where cuts topped 20 per cent.
The reductions came as global banking and markets grew revenue last year by 3 per cent amid a surge in trading. The unit posted a 7 per cent decline in adjusted profit, compared to the bank’s overall 45 per cent drop as credit impairments jumped.
“Global Banking and Markets performed particularly well, while Asia was once again by far the most profitable region,” the bank’s chairman Mark Tucker said in its 2020 annual results statement.
A cadre of senior executives is relocating in the coming months to Hong Kong from HSBC’s Canary Wharf headquarters, including Mr Guyett, people familiar with the plans have said previously, as Europe’s biggest bank shift its focus to Asia.
HSBC is set to begin paying bonuses and said in its results last month that it had set aside US$2.66 billion (S$3.56 billion) in discretionary awards for 2020, a drop of 20.4 per cent. The bank said that it had “differentiated by market, with a better year-on-year outcome in Asia, reflecting the region’s strategic importance and consistent contribution towards group performance.”
Some competitors such as Morgan Stanley and Goldman Sachs Group set aside double-digit increases in total compensation for its investment bankers in Asia, while JPMorgan Chase & Co and Citigroup also increased pay.
More junior staff were generally less affected by the cut, HSBC said, with those lower down in the bank receiving bonuses more in line with their performance than senior employees.
Among those set to lose out on their bonus are staff facing redundancy in some jurisdictions. Under its pay policy, employees are no longer eligible for a share of the bank’s bonus pool once they have been informed they are being cut even if they are still employed by the company on or beyond the date when the payments are made.
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