HSBC lifts CEO Quinn's pay and eyes special payout after profit jump

HSBC’s adjusted pretax profit rose 92% to $6.83bn (€6.4bn) in the fourth quarter, above the $6.51bn (€6.1bn) consensus estimate

HSBC cut its annual bonus pool by 4% to $3.4bn (€3.19bn) in 2022, the bank said on Tuesday, as a global slump in deals led it to trim awards for its bankers.

Despite the overall bonus cuts for staff, Chief Executive Noel Quinn saw his pay package jump 14% to £5.6m (€6.31m), from £4.9m (€5.52m) the prior year.

Once long-term incentive awards are included, Quinn's total pay could reach £10.5m (€11.82m), the bank said.

HSBC will also consider a special payout after the sale of its Canadian unit as the bank attempts to face down a campaign from its largest shareholder to pursue a wider break-up of the business.

Reporting results that beat analyst estimates, HSBC said it may pay a special $0.21 dividend after the completion of the unit sale amid an ongoing tussle with major shareholder Ping An Insurance Group Co of China. 

The bank announced the all-cash $10bn (€9.38bn) sale of HSBC Canada in November as it seeks to convince investors its plan to refocus on Asia is a better bet than Ping An’s call to consider spinning out its business in the region.

HSBC’s adjusted pretax profit rose 92% to $6.83bn (€6.4bn) in the fourth quarter, above the $6.51bn (€6.1bn) consensus estimate of analysts compiled by Bloomberg. 

Like other global financial services firms, the lender has benefited from rising interest rates. Its net interest margin - a key measure of profitability - rose to 1.74% in the quarter, up from 1.19% a year earlier.

“We are on track to deliver higher returns in 2023,” CEO Noel Quinn said in its earnings statement. “With the delivery of higher returns, we will have increased distribution capacity, and we will also consider a special dividend once the sale of HSBC Canada is completed.”

In a move that will prove especially popular to its large investor base in Hong Kong, HSBC said it would resume paying quarterly dividends from the first quarter of this year. It said it has brought forward its consideration of buybacks to the first quarter of 2023 and will look other potential buybacks, in addition to any existing program. 

HSBC previously said it would only resume buybacks once its core capital moved back within its target range of 14% to 14.5%.

The bank’s shares rose 0.4% in early afternoon Hong Kong trading. Cost pressures are one of the biggest issues facing the bank. Stevenson told a conference in September that rising inflation could force the lender to significantly increase salaries and that “brutal” cuts could be needed to keep a lid on costs.

The lender’s costs rose 2% in the period due to technology spending and performance-related pay. Overall for last year, the bank’s variable pay pool shrank to $3.36bn (€3.15bn) from $3.5bn (3.28bn) in 2021 as it paid less to investment bankers.

HSBC is among banks that have been seeking to increase shareholders' returns as rising interest rates propel profits, but its outlook has long been complicated by geopolitical tensions.

On the credit side, the bank’s results were hampered as expected credit losses almost tripled to $1.4bn (€1.31bn) in the quarter, primarily due to corporate exposures in the UK and mainland China commercial real estate.

HSBC is in the midst of an overhaul of its global operations, most recently announcing the sale of its Canadian unit to Royal Bank of Canada, to refocus on Asia. That deal is expected to close later this year and generate a pretax gain of $5.7bn (€5.34bn).

The bank is also looking to develop its operations in some of Asia’s biggest markets. HSBC has put a renewed focus on building up its Indian unit and plans to open an onshore private banking service for the country’s wealthiest citizens this year.

Management was bogged down last year in efforts to head off a campaign by Ping An Insurance Group Co., the company’s largest shareholder, to force it to consider a spin-out and separate listing of its Asian operations. HSBC has said it can create more value by keeping and growing the business.

The results are the first under new chief financial officer Georges Elhedery, who took over from Ewen Stevenson at the start of the year.

Bloomberg