HSBC’s Pay Pool Slides by a Third as Loan Losses Slam Profits


(Bloomberg) -- HSBC Holdings Plc’s variable pay pool, key for bonuses for traders and bankers, has slid by a third at the start of the year from 2019 as rising loan losses dent profit at Europe’s largest bank, according to an internal memo.

“We will continue to review this as the year progresses, but given the uncertainty it is too early for us to predict exactly where we will be on performance or pay,” HSBC Chief Executive Noel Quinn said in the memo on Tuesday. A Hong Kong-based spokeswoman confirmed the memo.

The bank on Tuesday revealed a steep drop in first-quarter profit as loan losses swelled to the highest level in almost nine years. Lenders globally are struggling with a rising wave of bad debt as the coronavirus outbreak has grounded the global economy.

HSBC predicted that loan losses could grow to as high as $11 billion this year after recording a $3 billion hit in the first three months of the year. Earnings slumped and fell well short of estimates, even as trading was one bright spot for the bank amid turbulent markets.

The lender has also canceled dividends this year at the behest of U.K. regulators to preserve capital levels as it seeks to help clients globally to survive the economic storm. Quinn, named as permanent CEO last month, has already said he won’t take a cash bonus this year as well as donate part of his salary to charities. He made a total compensation of 1.98 million pounds ($2.5 million) last year.

HSBC’s variable pay pool was $3.34 billion in 2019, according to its annual report.

Quinn has also been forced to halt parts of a restructuring program, which had targeted letting go of 35,000 workers and revamping large parts of the business to boost profitability. That will mean less in savings this year for the lender.

In an interview, Quinn said the bank will make up the shortfall elsewhere to lower the cost base in 2020 from 2019.

“We can offset any loss of savings that we were anticipating in 2020 from the redundancy program by saving elsewhere in the bank,” he said. This can happen via travel and market spending, and a significant reduction in any hiring we were going to do this year, he said.

©2020 Bloomberg L.P.

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