HSBC’s bonus pot for top bankers jumped by a third to £2.6 billion while chief executive Noel Quinn took home £9 million it emerged today.
Those figures might spark fresh anger at the rewards in the financial sector, following a pandemic that saw nurses offered a pay rise of 1%.
The UK’s biggest bank says the pay is simply a reflection of returns.
Quinn said there is a “competitive market” for talent in banking. “We took our variable pay down when profits declined, we put it up when profits go up,” he told the Standard.
Profit for 2021 jumped from $10 billion to nearly $19 billion. Quinn and his finance director Ewen Stevenson are optimistic about the prospects for the UK economy this year, expecting a “very material uplift” to returns thanks to rising interest rates which widen bank profit margins.
Speaking from the Canary Wharf London HQ, Quinn said the building is about half full, with 4000 staff enjoying the “team work and the energy” of being back in the office.
Stevenson said he and Quinn are “very conscious” and “sensitive” to wider public concern about banker pay and noted both took a pay cut during Covid. He expects that increases in borrowing costs won’t cause customers “undue hardship”.
HSBC is taking a $500 million hit from its exposure to China’s troubled real estate sector.
Freetrade’s Dan Lane said: “The fear is $500m will only be a starting point - the Bank might not have to swallow any more upfront but if real estate worries ripple out wider, investors could pull assets away from the likes of HSBC.”
The bank has restored dividend payments and embarked on a multi-billion share buyback programme.
The annual report shows that Quinn landed £4.9 million in pay and bonuses and £4.1 million in long-term share awards. HSBC like other banks has been able to release money set aside for Covid loans it feared would go bad. It returned $900 million to its own balance sheet last year.
Quinn said in the statement: “We have good momentum coming into 2022 and are confident that we can continue to execute against our strategy.
“We also remain cognisant of the potential impact that further Covid-19 related uncertainty and continued inflation might have on us and our clients.”
The annual report showed that Mr Quinn and other executive directors donated their base salary increases for 2021 to charity – amounting to £22,000 for Mr Quinn – “given the ongoing challenging external environment”.
Stevenson – whose total pay packet jumped to £3.7 million for 2021, plus £2.4 million in long-term share awards on top – also donated his £112,000 fixed pay allowance increase to charity.
Will Howlett, equity analyst at Quilter Cheviot, said: “While HSBC’s pre-tax profits nearly doubled in the final quarter of 2021, looking beyond this headline number the bank’s results were a little mixed. HSBC posted pre-tax profits which were actually a little behind expectations, reflecting higher loan loss charges including increased allowances for Chinese commercial real estate, which follows market concerns. The key positive is that HSBC is bringing forward its target of generating a return on tangible equity above 10% by one year to 2023. HSBC states that it has ‘turned the corner on revenue’ and this is supported by higher interest rate sensitivity and the expectation that interest rates will increase more quickly.”
HSBC shares today fell 4p to 543p. That leaves the bank valued at £110 billion.
