Daily Management Review

In a Speedy Backdeal, HSBC Drops Plan for 2016 Pay Freeze


In a Speedy Backdeal, HSBC Drops Plan for 2016 Pay Freeze
Reversing a cost-cutting decision made less than two weeks ago, HSBC, Europe's largest bank, has dropped plans to freeze pay this year, according to a memo by Chief Executive Stuart Gulliver reports Reuters.
HSBC's board is set to meet to discuss whether the bank will move its headquarters to Hong Kong or stay in London in just a few days and the internal memo contains a caution expressed by Gulliver on the outlook for HSBC's revenues this year.
The memo from Gulliver to all employees and dated February 11 said that the pay rises will be funded from a bonus pool originally intended for payments to be made in 2017.
However the freeze on hiring that was introduced since the fourth quarter of 2015 will remain in place.
There were around 266,000 employees in the bank at the end of 2014 and the bank has plans to save costs amounting to $5 billion by 2017.
"As flagged in our Investor Update we have targeted significant cost reductions by the end of 2017," a spokeswoman for HSBC said in a statement.
He had "decided to change the way these cost savings are to be achieved", Gulliver said after following feedback on the pay freeze and the way it was communicated.
"We will therefore proceed with the pay rises as originally proposed by managers as part of the 2015 pay review, noting that, consistent with prior years, not all staff will receive a pay rise," he said.
The memo said that the bonuses for 2015, which are due to be paid in 2016, will not be affected.
There were reports recently in the media that a hiring and pay freeze would be imposed by the bank across all sections of the bank globally in 2016.
Concerns about the global economy like falling oil prices and slowing Chinese growth, as well as lower growth expectations for Britain were also highlighted by Gulliver in the memo.
"These macroeconomic pressures mean we must be cautious and realistic about the outlook for our revenues in 2016," the memo said.
In recent bank, the banking sector has come under pressure from worries about global growth.
"Several of our competitors have recently announced large-scale redundancies, salary freezes, bonus reductions and further cost reduction programs in addition to those already in place and hence it is clear we are not alone in facing these challenges," Gulliver said.
While Deutsche Bank said last month it had scrapped board bonuses this year after posting a record loss for 2015, Swiss bank UBS is imposing a pay freeze across its investment banking arm, sources who were familiar with the matter were quoted in the media as saying.

According to data available in the public domain staff cuts of 130,000 in the second half of 2015 have been announced by ten of Europe's biggest banks. This retrenchment would be more than those that were done in the years 2013 and 2014 combined.
The industry will need to slim down further and faster to boost profits, the investors believe.