Bonuses are back

Brokers and analysts in the equities department at HSBC are looking forward to the prospect of receiving cash bonuses next month for the first time since 2001.

The UK bank's equities division was recently amalgamated within a larger markets division, from which the bonuses will be paid. This has prompted the bank to reverse its policy of the past two years of paying bonuses to staff in equities in the form of HSBC stock.

That policy resulted in an exodus of staff, led by Mark Brown, global head of research; Frans Lindelow, head of European product; and Sanjiv Mahal, head of European trading. The decision not to pay cash bonuses was repeated last year.

The departures were compounded three months ago when HSBC laid off around 400 staff in its equities division.

Not all bankers at HSBC will receive bonuses, but there will be a wider spread than in previous years.

Senior sources at the bank said the equities team is expected to do better than the corporate finance and investment banking team.

A spokesman for HSBC said the bank did not comment on personnel matters. He said: "We pay market rates for market performance. HSBC has been recruiting selectively across a number of corporate, investment banking and markets areas for the past several months and plans to make more key hires in 2004."

The change in policy comes after the arrival of John Studzinski from Morgan Stanley and Stuart Gulliver from HSBC in Hong Kong as co-heads of the corporates and markets division at HSBC.

Many European banks will be increasing the proportion of bonuses paid in stock this year in line with the practice at US banks. Headhunters estimate bonuses to be, on average, up 25% to 30% on last year, although the increase relates to only a handful of star bankers earning up to 50% more than last year. Many other staff will miss out altogether, headhunters and banking sources said.