It seems that HSBC is in possession of one of the most profitable large investment banks in the world. It also seems that HSBC pays its risk personnel very generously.
With its fourth quarter results, HSBC revealed today that a mere 52% of revenues at its global banking and markets division were consumed by costs in 2013. This looks very favourable compared to the 93% of revenues absorbed by costs in Morgan Stanley’s Institutional Securities business, the 82% of revenues subsumed by costs at Credit Suisse’s investment bank, or the 79% of revenues that went to costs at UBS’s investment bank. ‘Even’ at Goldman Sachs, costs accounted for 66% of revenues last year.
HSBC has a reputation for paying its investment bankers badly. This may explain its profitability, but may not be entirely fair. According to pay benchmarking company Emolument, HSBC pays its managing directors in London an average of £523k a year, which is more than the £384k allegedly on offer at SocGen – another notoriously poor payer. And today’s results include the table below, showing that someone outside senior management at HSBC earned £8m ($13.3m) last year. Four other people earned more than £4m.
The highest earners at HSBC:
In an organisation employing more than 200,000 people, five super-earners may not sound too spectacular by investment banking standards. What is notable, however, is HSBC’s great generosity to Marc Moses, its new global head of risk.
In 2014, Moses has the potential to earn £6m ($10m) if he meets all his targets. This puts Moses on a par with Iain McKay, HSBC’s group finance director. Since when did CROs earn the same much as heads of finance?
Moses’ elevation to the eight-figure club suggests HSBC is following US banks in making chief risk officers the recipients of great largesse. Bank of America helped start the trend back in 2010, paying then-chief risk officer Bruce Thompson $11.4m
Notably, Moses isn’t just HSBC’s head or risk. He’s also in charge of HSBC’s compliance function. And having had a few problems with money laundering and related penalties, HSBC has been investing heavily in regulatory control. Last year it hired an additional 3,000 compliance officers, and boosted the compliance budget to around $800m a year.
Moses’ package reflects this. By comparison, the mere £3m Barclays offered the now-retired Hector Sants looks a bit measly. HSBC’s risk and compliance staff can only hope some of the bank’s generosity trickles their way too.