Bank Instruments

Earning at HSBC’s investment bank vs. Goldman Sachs

It’s bonus day at HSBC today. Following the unexpected departure of Matthew Westerman, the ex-Goldman Sachs head of HSBC’s global banking group in November last year, all eyes are on how much HSBC pays its investment bankers. The compensation report accompanying today’s annual report suggests HSBC might actually pay them quite well.

HSBC had 677 material risk takers in its investment bank last year. It paid them a total of $823m. This works out as an average of $1.2m per head, which isn’t bad given that HSBC has a (seemingly undeserved reputation) for being stingy.

U.S. investment banks have yet to release pay figures for 2017, and when they do so they will pertain only to their UK operations. The chart below therefore compares global average pay figures for material risk takers at HSBC in 2017 with UK and Europe-specific average pay figures for material risk takers at U.S. banks in 2016. Nonetheless, the implication is clear: HSBC pays its senior people on a par with big U.S. rivals like Citi and BAML, and is only just behind Goldman Sachs.

To the extent that HSBC falls behind, it appears to do so in terms of salaries: Goldman’s salaries, for example, are 40% higher in the chart below.

Global banking revenues (from M&A and primary issuance activities) were flat at HSBC last year compared to 2016. Fixed income revenues were down 6%; equities revenues were up an impressive 26%. HSBC didn’t break out compensation for its investment bank specifically in 2016, so it’s hard to gauge how compensation compares. However, there are distinct indications that HSBC is paying to keep people after Westerman’s exit: 180 material risk takers outside senior management earned over €1m in 2016; in 2017 208 did. Even more impressively, 17 people at HSBC earned over €4m for 2017, compared to six a year earlier.

If it likes you, there are also signs that HSBC will pay to get you on board: 17 people who joined the bank received guaranteed bonuses averaging $671k last year.