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Each week, Roula Khalaf, the Editor of the Financial Times, picks her top stories for this newsletter, providing engaging and insightful reads.
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HSBC recently shook things up by dismissing several investment bankers just when they anticipated learning about their bonus payments. Many of these employees left without any bonuses, highlighting a more stringent approach to cost management under the leadership of Georges Elhedery, the new CEO.
The London-based banking giant informed its UK investment banking team last month that their roles were being cut. This move came after an announcement in January that it was closing its mergers and acquisitions advisory services and its equity capital markets operations outside of Asia and the Middle East.
These layoffs coincided with the time when these bankers expected their annual bonuses for work done in 2024. However, individuals at the vice-president level and higher, affected by this restructuring, reportedly did not receive any bonuses.
“This isn’t typical of HSBC,” said a person familiar with the situation, noting that the bank generally had a reputation for taking care of its employees. HSBC declined to provide any comments on this matter.
In contrast, some other investment banks offer bonuses even to those affected by restructuring, though these are often reduced.
Since assuming his role in September, Elhedery has been focused on achieving substantial cost reductions. Just last month, HSBC announced an ambitious goal to save $300 million in 2025 while trimming $1.5 billion from its annual expenses by the end of the following year.
While considering a full pullout from investment banking in Asia and the Middle East, Elhedery decided against it. According to sources, maintaining investment banking activities in these regions is crucial for preserving important client relationships.
Moreover, HSBC has reduced some investment banking roles in Hong Kong. This division accounts for a relatively small percentage of HSBC’s overall operations, where commercial and retail banking dominate.
Elhedery’s broader strategic overhaul involves merging two of HSBC’s three primary divisions, eliminating a tier of high-cost senior bankers, and reorganizing operations into “eastern” and “western” market segments, which have undergone rebranding since.
Despite preparing for potential job losses, some investment bankers were counting on receiving at least part of their bonuses, as these were tied to their efforts from the previous year.
In recent times, HSBC has been under pressure to rein in costs as the upward boost from higher interest rates, which it benefited from in prior years, has started to wane. With interest income making up approximately half of HSBC’s revenue, there was a noted decline in net interest income last year.
HSBC disclosed a potential remuneration package for Elhedery, which could reach £15.3 million—and rise to £19.8 million if the bank’s shares surge by 50%. This arrangement incentivizes Elhedery strongly to drive up the share price.
This figure would significantly surpass the compensation for his predecessor, Noel Quinn, whose total pay package in 2023, his final complete year at HSBC, amounted to £10.6 million. That was nearly twice what he had received the previous year, thanks in large part to a long-term incentive plan.
