HSBC’s fixed income traders didn’t do badly last year: credit trading revenues were up 90% on 2019, rates revenues were up 20% and FX revenues were up 26%. This may not, however, be sufficient to achieve a decent – or even flat – bonus.
HSBC doesn’t announce its bonuses internally until tomorrow, but today’s results and their accompanying remuneration report give a reasonable idea of what to expect. HSBC has cut its overall bonus pool by 20%, to $2.6bn. In the investment bank specifically, the bonus pool paid to material risk-takers (senior bankers, traders and key control personnel) is down 18%.
The smaller bonus pool for HSBC’s material risk-takers is partly down to job cuts. HSBC said today that it cut senior managers across the bank by 17% last year as it “removed layers” of management. Accordingly, 8% of material risk takers, or nearly 50 people in this category disappeared in 2020. On balance, therefore, the average bonus per head for material risk takers in HSBC’s investment bank was down 11% to $500k.
The upshot is that HSBC’s average material risk taker earned $1.1m last year, down from $1.2m in 2020. More importantly, the number of people across HSBC who earned more than €1m fell from 420 people in 2019 to 324 people last year, with an even more dramatic reduction in employees earning over €3m from 42 to 27 people.
Someone at HSBC is therefore being paid a lot less. And it seems likely that these people include HSBC’s formerly high earning traders in London and New York – locations the bank described today as “low return” as it reinvents its global banking and markets business to be “the pre-eminent corporate and investment bank in Asia,” and assigns people and resources accordingly.
This doesn’t mean London and New York are being cut entirely – HSBC still wants to operate in U.S. dollar clearing, trade finance and FX, but as the bank hikes its cost-cutting target from $4.5bn to $5.5bn, the Asian business is by far the safest place to be. – Away from the huge investment in Asia wealth management, HSBC plans to invest a further $0.8bn in the Asian investment bank, and to strengthen its Asian market access and execution capabilities, while enhancing digital transaction banking on the continent.
While Asia is the sweet spot, traders in London and New York look vulnerable – particularly as many of the long-serving managers who might have protected them have disappeared. Last year, HSBC appointed new people to 50% of its top 200 positions globally. London and New York traders at the bank could, however, have it worse: they could be in HSBC’s global finance function where digitization is predicted to reduce headcount by 40% in the coming years.
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