Morning Coffee: HSBC decides it’s too much hassle to pay some people bonuses. Risky game at Barclays

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They've got the small-bonus blues.

HSBC is shifting away from discretionary bonuses towards fixed pay. The decision has some bonus-starved back-office employees up in arms.

HSBC is capping bonuses for thousands of operational staff globally to streamline remuneration, even as ex-CEO Stuart Gulliver is getting a cool $8.5m payout, a 7.2% pay raise, according to the FT. The bonus-streaming seems to be about making managers' lives easier: an HSBC insider said it's intended to “simplify” processes and free up management time.

The UK-headquartered bank, Europe’s biggest by assets, plans to restrict bonuses paid next year to junior employees within its back office by limiting payments to the equivalent of two-and-a-half months’ salary. It will increase the base salary for some staff starting next month “to ensure an appropriate balance between fixed and variable pay.”

Even though HSBC tried to assure employees that “this is simply a ‘rebalancing exercise,’” it’s a bit strange, because most banks do not have such caps for junior staff.

The number of full-time employees at HSBC at the end of last year amounted to 228,687, a decrease of 6,488 staff year-on-year.

However, it wasn't all bad news. The memo to staff comes a day after HSBC reported an 11% increase in annual pre-tax profit to $21bn thanks to strong loan growth, particularly in Asia. HSBC boosted its variable pay pool for all staff by almost 9% to $3.3bn for 2017. Of this, investment bankers received $1.1bn, an increase from $954m the previous year.

Separately, there’s been a bevy of Barclays news causing a wide range of reactions, but some employees are not happy, as the bank is playing a risky game.

Despite recent talk of dividends and share buybacks, Barclays has been stingy with shareholders for some time because huge costs potentially lurk from regulatory penalties for which it has no cushion. The bank has been battling fraud charges related to its 2008 capital raising and crisis-era mortgage-bond sales. Rivals such as Deutsche Bank made very large provisions before they settled their fines, but Barclays is heading to court with nothing put aside, according to the Wall Street Journal. That’s risky business, indeed.

People at Barclays earning over £1m ($1.4m) have 100% of their bonuses deferred, so they could lose a lot if these fines come through and Barclays' share price collapses.

Compensating the best-performing traders and dealmakers while laying off others is part of CEO Jes Staley’s plan to build a bulge-bracket investment bank capable of competing with the biggest players on Wall Street, according to Bloomberg.

Meanwhile:

Treasury Secretary Steven Mnuchin said that the Trump administration’s policies will raise U.S. wages without causing broader inflation. (Bloomberg)

Big banks in the U.S., which have been seeking to hire more foreign workers in recent years under the H-1B visa program, are now being forced to reconsider their approach after the Trump administration made it harder to obtain the work permits. (Bloomberg)

Claiming unfair dismissal, a former executive director-level currency salesman at J.P. Morgan says that he unfairly lost about £2m ($2.8m) in compensation, including bonuses and unvested stock awards, after he was let go for a practice that was previously commonplace at the bank. (Bloomberg)

ECM bankers rejoice: Securities regulators hoping to spur more initial public offerings are weighing a move that would allow all companies to stage private talks with investors before announcing they will sell stock. (WSJ)

Goldman Sachs raised $2.5bn to buy minority stakes in private-equity firms, betting on an industry that is commanding increasing influence as more businesses choose to stay private longer. (WSJ)

Matt Moberg, the lead portfolio manager of the $5bn DynaTech fund at Franklin Templeton, says that his European history major as an undergraduate student gives him an edge when it comes to assembling the perfect portfolio. (Business Insider)

New York-based LUX Fund Technology and Solutions (FTS) hired Christopher Bloechle, Point72 Asset Management’s former head of IT, as its new CTO. (HFMWeek)

The biggest private-equity firms are in a fund-raising frenzy, but it will be increasingly hard to find the returns that have made them such money magnets. (WSJ)

Eight months after the VC world was rocked by widespread claims of harassment, the industry trade group in charge of lobbying is distributing HR guidelines. (Bloomberg)

What is Wall Street’s relationship status with guns? It’s complicated. (Bloomberg)

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