HSBC bankers' & traders' bonuses eroded by Evergrande woes

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HSBC bankers' & traders' bonuses eroded by Evergrande woes

No one knows how exposed HSBC is exactly to Evergrande, the Chinese property developer. This is part of the problem. As concern about Evergrande's $90bn of debt and $300bn of unpaid bills pervades the market, investors are looking edgily at who might be left carrying the can. As an Asia-focused bank, HSBC looks like one of many potential suspects: the bank's share price is down nearly 4% today and has fallen 10% since late August and 21% since May as Evergrande's troubles coalesced.

HSBC isn't commenting on its Evergrande exposure. Bloomberg reported on Friday that it holds $206.9m of Evergrande's bonds (behind UBS with $275m and BlackRock with $375m), which sounds manageable. However, HSBC was providing mortgages to people purchasing Evergrande properties in Hong Kong until July and has broader exposure to the real estate sector, both in China and Hong Kong.

HSBC isn't the only bank being eyed by investors in relation to Evergrande: JPMorgan's shares are down 3.6% today and Goldman Sachs' are down over 4%. Among Western banks, one of the worst impacted is Standard Chartered, whose shares fell nearly 5% today. 

It's worth remembering, though, that HSBC's bankers and traders had already been grumbling over last year's bonuses, which were down by 11% for the bank's material risk-takers in 2020. This decline coincided with a drop in the number of HSBC employees earning over $1m from 420 in 2019 to 324 in 2020. As a result, Bloomberg suggested in March that even HSBC's high-performers were paid less in the last bonus round and that HSBC's best people were complaining as a result.

The 21% drop in HSBC's share price since May has eroded the value of those bonuses still further. HSBC's remuneration report for 2020 shows that 541 risk-takers in its investment bank received $74m in deferred stock bonuses for 2020, and that people in the investment bank had a further $184m in unvested HSBC stock outstanding. 

As the HSBC share price falls, its bankers and traders who were already unhappy with last year's payments risk becoming even more so. Fortunately, HSBC increased the bonus pool in its investment bank by $300m in the first half of 2021. Insiders will hope a large proportion of that is paid in cash.

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