HSBC reintroduces guaranteed bonuses

HSBC has agreed to pay guaranteed bonuses in a repeat of a policy that prompted an exodus from its mergers and acquisitions (M&A) department two years ago.

In the past two weeks, HSBC is understood to have bought out the contracts of two Citigroup bankers and offered them two-year guarantees as part of its drive to establish a leading M&A business.

In 2001, the M&A department's reduced bonus pool was swallowed up by guarantees to a small number of bankers. This led to the resignation of senior M&A staff who were not paid guarantees.

While the bonus pool has been scrapped, the bank is understood to have offered guarantees to Robin Phillips and Rupert Robson from Citigroup to join as global sector heads in transport and financial institutions respectively. A UK headhunter said: "HSBC is paying guaranteed bonuses, which is an indication of how serious they are, as well as of a general market upturn."

A spokesman for HSBC said the bank refused to comment on compensation.

In April, HSBC recruited John Studzinski as co-head of corporate and investment banking to rebuild its advisory activity. The bank made 30 corporate financiers redundant to make way for new faces. Studzinski, with co-head Stuart Gulliver, has been hiring senior staff to head six sector teams: energy, consumer, autos, financial institutions, pharmaceuticals and industrials.

While some of the appointments have been lateral hires from elsewhere in the bank, others have been headhunted from rival banks.

The bank is believed to have covered the bonuses of Phillips and Robson for 2003 and will guarantee them a similar amount for 2004.