HSBC has taken a drastic approach to cost-cutting under its new chief executive, Georges Elhedery, by terminating investment bankers on the day they were scheduled to receive their bonus figures—without awarding them any bonuses. The move underscores the bank’s tightening grip on expenses as it scales back its global investment banking operations.
The London-based lender had already announced in January that it would shut down its mergers and acquisitions advisory division and equity capital markets business outside Asia and the Middle East. Last month, affected employees in the UK investment banking unit were informed of their job losses, just as they anticipated learning about their annual bonuses for work done in 2024.
According to sources familiar with the matter, HSBC did not grant bonuses to vice-presidents and senior employees impacted by the restructuring. One source remarked that this approach was “very unlike HSBC,” which had previously built a reputation for taking care of its staff. The bank declined to comment on the matter.
Other investment banks sometimes offer reduced bonuses to laid-off employees as a goodwill gesture, even amid restructuring efforts. However, HSBC’s decision highlights the aggressive cost-reduction strategy being pursued by Elhedery since assuming leadership in September.
HSBC has set an ambitious target of saving $300 million in 2025 and cutting $1.5 billion from its annual cost base by the end of next year. Reports suggest that Elhedery had also considered shutting down investment banking operations in Asia and the Middle East but ultimately refrained, as maintaining high-level client relationships in those regions remains crucial.
The bank has implemented job cuts in Hong Kong, as investment banking represents a relatively small fraction of HSBC’s overall business, which primarily relies on commercial and retail banking. The ongoing investment banking retreat is part of a broader transformation initiated by Elhedery, which includes merging two of HSBC’s three major divisions, reducing high-cost senior roles, and restructuring operations into “eastern markets” and “western markets.”
HSBC’s cost-cutting measures come amid declining net interest income, following a period of growth fueled by rising interest rates. As the bank adjusts to a changing financial landscape, it has also proposed a substantial compensation package for Elhedery, worth up to £15.3 million, which could increase to £19.8 million if the company’s stock price rises by 50%. The incentive-heavy pay structure starkly contrasts with that of Elhedery’s predecessor, Noel Quinn, who received a total pay package of £10.6 million in 2023, nearly double the previous year due to the vesting of a long-term incentive plan.
The Financial Times, which first reported on the terminations, noted that HSBC’s decision to deny bonuses to departing employees deviates from industry norms. Investment bankers who were already preparing for job cuts had still expected to receive a portion of their bonuses, given that they pertained to work completed in the previous year.
HSBC’s aggressive restructuring reflects its prioritization of cost efficiency and shareholder value over employee retention, signaling a new era of financial discipline under Elhedery’s leadership. However, the move may also impact the bank’s reputation within the investment banking sector, potentially influencing talent acquisition and retention in the future.
