HSBC still looks set to pay comparatively dire bonuses

HSBC isn't known for its generosity. In 2003 it popularized the practice of paying zero bonuses to its equity researchers. This year, it says performance related pay will be up.

Like Barclays, HSBC has done very well out of its investment banking and markets activities over the past six months. Its interim results, released today, show pre-tax profits for the business rising 134% year on year.

Following this impressive performance, HSBC is keen to point out that people in its global banking and markets division will be rewarded. It states specifically (in a highlighted box on page 25) that performance related pay in global banking and markets is up.

However, it's difficult to reconcile HSBC's apparent willingness to pay generous bonuses with the reality suggested by its figures.

Operating expenses at HSBC's global banking and markets division fell nearly 9% year on year over the past six months, to 36% of net revenues. At Barclays Capital operating expenses were 75% of net revenues over the same period.

At US investment banks, compensation alone has historically accounted for 50% of net revenues.

Even if HSBC is increasing performance related pay, it's hard therefore not to conclude that its global banking and markets staff are being allocated a comparatively small proportion of the profits they generate. Bonuses at HSBC may be higher, but don't expect them to be high.