HSBC Bonus Winners, Losers Said to Get Ruthless Under Westerman

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  • Disparity between top and bottom performers to be more marked
  • About 100 managing directors and directors said cut globally

HSBC Holdings Plc is sharpening divisions within its investment-banking bonus pool this year, giving more lucrative awards to top performers while slashing compensation for those ranked at the bottom, people familiar with the moves said.

The bank is also cutting 100 senior staff at the managing director and director level across both the banking and trading units, reductions that are part of a harsher end-of-year review procedure, they said. The pay change is designed to boost the division’s competitiveness and is an attempt to break from HSBC’s traditional approach, which was more egalitarian than most other investment banks, said the people, who asked not to be identified because staff haven’t yet been told.

The bonus policy has been brought in by new co-head of banking Matthew Westerman, who served as chairman of Goldman Sachs Group Inc.’s European investment banking unit before HSBC hired him in February. Westerman has already restructured management following a combination of the banking and capital financing units and overseen several high-profile exits.

"We review on an annual basis performances across Global Banking & Markets and make appropriate changes to strengthen and grow the business,” HSBC said in a statement, declining to comment further.

The overall pay pool at the banking unit, which includes merger advisory as well as debt and equity capital markets, will be down slightly from 2015, the people said. That reflects a fall in revenue, which is down 7 percent in the first nine months of the year, the people said. The aim is to have fewer bankers concentrated in the middle pay brackets, they said.

To read more about recent changes to HSBC’s investment bank, click here

Under Westerman, the investment bank is also introducing more competition into its promotion cycle, one of the people said. This year the bank is promoting a smaller percentage of candidates up for managing director.

Chief Executive Officer Stuart Gulliver has laid out a broader plan to shrink the global lender by cutting 25,000 jobs and reducing annual expenses by $5 billion by the end of 2017.

The bank will also be bolstering incentive pay for employees that have collaborated with other parts of the bank to win new business, such as the commercial arm, or show “positive behaviors” such as attendance at training, completing tests and reporting suspect behavior from colleagues and the bank’s clients, said one of the people.

HSBC has already merged its capital financing operations with the banking business, which resulted in an initial round of senior job losses and the creation of a raft of new positions in June. The bank ranked 18th last year among advisers on global mergers and acquisitions, according to data compiled by Bloomberg.

— With assistance by Richard Partington, Ambereen Choudhury, and Manuel Baigorri

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