News Column

HSBC chief in line for pound(s)1.7m pay hike

February 25, 2014

mark williamson; mark williamson

HSBC has proposed to hike chief executive Stuart Gulliver's basic pay by pound(s)1.7 million and similar measures for more than 200 high paid bankers in the UK, claiming it needed to act to prevent the planned EU cap on bonuses provoking an exodus.

Chaired by Glasgow-born Douglas Flint, HSBC has also underlined its enthusiasm for the UK, which the banking giant believes is set for relatively strong economic growth.

The 9% growth in pre tax profits at HSBC Holdings, to $22.6 billion (pound(s)13.6bn) in 2013, from $20.6bn in 2012, fell short of City expectations. But Mr Flint said the bank achieved good progress in the markets it has decided to focus on.

Mr Gulliver, whose total remuneration increased to pound(s)8m last year from pound(s)7.5m in 2012, shrugged off concerns about the outlook for emerging markets, in which HSBC has invested heaviliy.

He noted the bank expected the economy of mainland China to grow by 7.4% this year.

The bank felt justified in increasing the total bonus pot by 6% annually, to almost $4bn in 2013, from $3.689bn in the preceding year.

Proposed changes to the company's pay policy for executive directors and senior employees are likely to come under intense investor scrutiny.

The bank plans to pay bonuses to directors worth up to 200% of basic pay, the maximum amount allowed under a EU Directive intended to limit bankers' pay.

It has also decided to top up the salaries of executives, through Fixed Pay Allowances. These will not be subject to performance conditions.

Mr Gulliver is in line to get FPA shares worth pound(s)1.7m in 2014.

The value of the allowance represents 136% of the pound(s)1.25m base salary he earned in 2013.

If the plan is approved at the company's general meeting in May, Mr Gulliver will see his minimum pay and benefits increase to pound(s)4.2m, from pound(s)2.5m in 2013.

The bank said some 208 UK employees categorised as material risk takers, and 457 overseas, will also get allowances.

It did not give an indication of the size of the awards.

Questioned by reporters about the new policy, Mr Gulliver stressed it had only been introduced in response to the changes planned by the EU, under the CRD IV programme.

The bank highlighted international competition for banking talent.

It said: "The application of a cap on variable pay that can be paid to any 'material risk taker' ... in EU headquartered banks, presents significant challenges for the HSBC Group."

Mr Gulliver said the bank would reconsider if the UK Government succeeded in a legal challenge it has made to the bonus cap.

He noted the caps on bonuses would mean the maximum pay package he could receive if the proposal is implemented would fall, from pound(s)13.8m currently to pound(s)11.4m.

Mr Gulliver said the slimmed down bank has been making good progress with its efforts to cash in on growing wealth and trade in areas like Asia.

Asked to comment on a report the bank might spin off its UK retail arm, he said: "To be categoric, we have no plans to list our UK retail banking, wealth management business or any other part of our UK bank at the moment."

He added: "The UK is one of our two home markets (with Hong Kong), it will have some of the strongest GDP growth and it has markets in which HSBC can take market share."

The bank expects the UK economy to grow by 2.6%, this year, compared with 2.5% for the USA and 1.2% in Western Europe.

Mr Gulliver made no mention of Scotland.

Asked about the possible implications if Scotland votes for independence in September, a spokesperson for the bank said: "We are politically neutral on the referendum, which is a matter for the Scottish people."

The spokesperson said HSBC has a small but growing business banking operation in Scotland, where some functions that support the wider group are based.

With shares in HSBC Holdings falling 3%, 18.5p, to 635.7p the results seemed to leave investors underwhelmed.

HSBC, which is based in London but made two thirds of last year's profit in Asia, has axed more than 40,000 jobs and sold or closed 60 businesses over the past three years to cut costs, but has not yet reached its cost efficiency and profitability targets.

Chris Wheeler, analyst at Mediobanca, said. "It's not a disaster, but they are paddling hard to make any progress."

The average forecast for HSBC's pre-tax profits in 2013 was $24.3bn in a Thomson Reuters poll.

HSBC said it continued to build up capital, while it remained unclear how much it would need to hold under global and UK rules. It will pay dividends totalling 49 cents per share for 2013, up from 45 cents in 2012.

It set aside another $395m in the fourth quarter to compensate UK customers mis-sold loan insurance or companies mis-sold interest rate hedging products. HSBC also paid $321 million more than a year earlier under a UK bank levy.

Directors and 49 of the UK risk takers will get their allowance in shares. They will have to hold 80% of the shares for five years.

Mr Gulliver said he remained optimistic about the longer-term prospects for emerging markets, which have been hit hard by a US decision to wind down stimulus measures, but warned of "greater volatility in 2014 and choppy markets".

He noted that HSBC sees scope to use its international networks to win more business from Small and Medium Sized enterprises in the UK that want to trade overseas.

The bank has mounted a push to win business banking customers in Scotland from historically strong players in the country, such as Royal Bank of Scotland, Bank of Scotland and Clydesdale Bank.

Mr Gulliver said HSBC had grown its share of the UK mortgage market last year.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Herald, The (Scotland)


Story Tools