Morning Coffee: HSBC decides it’s too much hassle to pay some people bonuses. Risky game at Barclays
HSBC is shifting away from discretionary bonuses towards fixed pay. The decision has some bonus-starved back-office employees up in arms.
HSBC is capping bonuses for thousands of operational staff globally to streamline remuneration, even as ex-CEO Stuart Gulliver is getting a cool $8.5m payout, a 7.2% pay raise, according to the FT. The bonus-streaming seems to be about making managers' lives easier: an HSBC insider said it's intended to “simplify” processes and free up management time.
The UK-headquartered bank, Europe’s biggest by assets, plans to restrict bonuses paid next year to junior employees within its back office by limiting payments to the equivalent of two-and-a-half months’ salary. It will increase the base salary for some staff starting next month “to ensure an appropriate balance between fixed and variable pay.”
Even though HSBC tried to assure employees that “this is simply a ‘rebalancing exercise,’” it’s a bit strange, because most banks do not have such caps for junior staff.
The number of full-time employees at HSBC at the end of last year amounted to 228,687, a decrease of 6,488 staff year-on-year.
However, it wasn't all bad news. The memo to staff comes a day after HSBC reported an 11% increase in annual pre-tax profit to $21bn thanks to strong loan growth, particularly in Asia. HSBC boosted its variable pay pool for all staff by almost 9% to $3.3bn for 2017. Of this, investment bankers received $1.1bn, an increase from $954m the previous year.
Separately, there’s been a bevy of Barclays news causing a wide range of reactions, but some employees are not happy, as the bank is playing a risky game.
Despite recent talk of dividends and share buybacks, Barclays has been stingy with shareholders for some time because huge costs potentially lurk from regulatory penalties for which it has no cushion. The bank has been battling fraud charges related to its 2008 capital raising and crisis-era mortgage-bond sales. Rivals such as Deutsche Bank made very large provisions before they settled their fines, but Barclays is heading to court with nothing put aside, according to the Wall Street Journal. That’s risky business, indeed.
People at Barclays earning over £1m ($1.4m) have 100% of their bonuses deferred, so they could lose a lot if these fines come through and Barclays' share price collapses.
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