HSBC is now paying bonuses like Goldman Sachs circa 2020

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HSBC is now paying bonuses like Goldman Sachs circa 2020

It's HSBC results day and things are looking promising when it comes to HSBC bonuses. As Financial News pointed out, HSBC hiked the bonus pool for material risk-takers (its most senior bankers and traders) in its investment bank in 2021 by 53% compared to 2020. And as Bloomberg observes, the bonus pool across the bank as a whole is up by a third.   

What does this mean in practice? As the chart below shows, the average of HSBC's 505 material risk-takers received total compensation of nearly $1.5m last year, up 30% on 2020. The increase was driven by a huge 63% increase in individual bonuses for top performers, itself powered by the rising bonus pool plus the fact that there was a smaller number of people to receive it - HSBC dispensed with 36 of its risk-takers in 2021.  

The upshot is that compensation for top performers at HSBC is now looking a bit like compensation for top performers at Goldman Sachs, two years ago. Because it's not based in Europe, Goldman isn't compelled to make a detailed global disclosure for its risk-taker pay, but it does disclose compensation for its risk-takers in London. The most recently available figures, for 2020, show Goldman paying 558 London risk-takers an average of $1.4m. HSBC is part of the major league.

Except...Goldman Sachs is likely to have hiked its own risk-taker pay considerably higher this year following purported increases to its bonus pool of 40% or more (in investment banking at least). We won't know Goldman's actual risk-taker pay in the UK for 2021 until it makes a regulatory filing later this year, but average compensation per head of $1.7m for GS material risk-takers in 2021 doesn't seem out of the question.

This is not to disparage HSBC's big pay hike. 174 people at the bank are now earning over €1m, compared to 144 in 2020, and one mysterious person at the bank earned over €10m. HSBC is looking pretty generous compared to Standard Chartered, where the average material risk-taker earned $979k last year, and to NatWest Markets where the comparable figure was $887k.

Who are these fortunate people in HSBC's global banking and markets division? Material risk-takers are typically managing directors or senior bankers and traders. Some of last year's highest performers at HSBC appear to have been in equities, where revenues were up 45% year-on-year. The bank flagged the benefits of "volatility in Asian markets" in particular, so Hong Kong equity traders seem likely to have featured among the highest earners. 

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