FILE PHOTO: A view of HSBC building in Canary Wharf financial district in London, Britain, August 1, 2023. REUTERS/Susannah Ireland/File Photo
By Sinead Cruise and Lawrence White
LONDON (Reuters) – Climbing costs at HSBC have added to growing investor concerns about how big banks manage their expenses, putting executives under pressure to quickly address spending.
Although banks have seen revenues balloon in the higher interest rate environment of recent years, fast-rising costs are now beginning to pinch, consultants and shareholders said.
Recent results have shown lenders struggling with wage bills, regulatory costs and accelerating investment plans.
HSBC on Wednesday reported a 6% hike in costs in 2023, blaming spending on levies in the U.S. and Britain. Europe’s biggest bank by assets also forecast a 5% rise in costs in 2024, after committing to invest despite stubbornly high inflation.
A report last year by consultants Oliver Wyman and investment bank Morgan Stanley highlighted the need for banks to avoid one-size-fits-all cost-cutting strategies, in order to achieve savings with minimal effect on revenues.
HSBC’s 2023 pretax profit jumped 78% to $30.3 billion, but missed consensus estimates due to an unexpected $3 billion writedown on its stake in China’s Bank of Communications.
And while a fresh $2 billion stock buyback went some way to soften these blows, some fund managers expressed concern.
“Costs are clearly disappointing, with inflation and investment casting a shadow and posing a risk to earnings,” Hywel Franklin, head of European Equities at Mirabaud Asset Management told Reuters after the HSBC results.
British bank Barclays on Tuesday set out savings and cost-income ratio (CIR) targets that also fell short for some investors.
Barclays said it hoped to shave around 2 billion pounds off its costs over the next three years, lowering its CIR to “high-50s” by 2026, from 63% at end-2023.
HSBC Chief Executive Noel Quinn said his bank was navigating the cost strains better than the surprise overspend implied, with its CIR for 2023 down to 48% last year, from 64% in 2022.
Asset sales were also proving a useful cost management tool.
“We are actually selling a billion dollars worth of costs,” Quinn said, pointing to sales of HSBC’s French retail and Canadian arms which were completed in recent weeks.
“We continue to try and offset investment in the business for growth and efficiency reasons with savings elsewhere,” Quinn added on a media call.
Other European banks have also felt the squeeze. Credit Agricole this month reported a 15% jump in year-on-year underlying operating expenses in its fourth quarter, more than expected, and flagged a further 8% rise in costs for 2024.
Deutsche Bank said on Feb. 1 it would cut 3,500 roles as it tackles a 75% CIR and a 6% rise in 2023 non-interest expenses.
COMPENSATION
The Oliver Wyman and Morgan Stanley report said that global banks could redesign their workforce to clarify roles and align compensation, while corporate specialists should trim regional footprints to prioritise on recession-proof revenues.
As inflation continues to pressure their returns, some investors and analysts said bank executives needed to exercise restraint on share buybacks and pay, pending further progress on broader savings and in case of possible economic shocks.
“Buybacks artificially inflate earnings per share, potentially leading to unsustainable practices over quarterly periods,” Allen He, Research Director at FCLTGlobal, told Reuters, in comments about companies in general.
Meanwhile, compensation is being viewed as an increasingly significant component of banks’ rising cost bases.
A report on Feb. 8 from shareholder advisory firm Glass Lewis said it would “carefully review the strategic rationale for any rebalancing of bankers’ pay packages” in view of changes to regulation that removed caps on bonuses.
Quinn saw his total pay double in 2023 to $10.6 million from $5.6 million the year before, as long-term incentives from his appointment in 2020 began to vest, boosting his variable pay.
HSBC’s bonus pool rose to $3.8 billion from $3.4 billion in 2022, reflecting improved performance, and it would launch a variable pay scheme for junior and middle management staff.
That contrasted with Barclays where the bonus pool dipped 3% in 2023 to 1.75 billion pounds and CEO C.S. Venkatakrishnan saw his total pay fall from 5.2 million pounds to 4.6 million.
The Glass Lewis report said it would “generally expect increases in variable incentive opportunity to be accompanied by an appropriate reduction in fixed pay”, adding that the first bank to propose substantial changes may act as a litmus test.
“If an overhaul of pay is well-supported by shareholders, the other banks’ interest may well be piqued,” it said.
(Reporting by Sinead Cruise and Lawrence White; Editing by Alexander Smith)
News Related
-
, Nov. 28 — One of the most anticipated Android releases for 2023 has been the Google Pixel 8 lineup. The Pixel series is often considered the best of what Android has to offer since it brings the true stock Android experience. The Pixel 8 Pro was globally released on ...
See Details:
Google Pixel 8 Pro Review: Is this the best Android phone of 2023?
-
A blank space or an (NR) indicates no readings received. An (e) indicates that the water level has been estimated. An (w) indicates that the conditions were very windy, resulting in an inaccurate reading. Omatjenne Dam does not have abstraction facilities. The dam contents are according to the latest dam ...
See Details:
Namwater Dam Bulletin on Monday 27 November 2023
-
Dhaka, Nov. 27 — Nobel laureate Dr Muhammad Yunus has been appointed chair of the international advisory board of Moscow’s Financial University (under the government of the Russian Federation). On November 23, he joined a high-level strategic meeting with Prof Stanislav Prokofiev, Rector of the Financial University, and his colleagues. ...
See Details:
Dr Yunus appointed chair of Moscow Financial University's international advisory board
-
In a pivotal encounter at the International Cricket Council (ICC) Twenty20 World Cup Africa Final Monday, the Cricket Cranes faced Nigeria, knowing that a win could significantly boost their chances of securing one of the coveted tickets to the 2024 T20 World Cup in West Indies and the USA.Nigeria won ...
See Details:
Victory over Nigeria puts Uganda on the brink
-
Capture 1 The Bank Ghana (BoG) Monetary Policy Committee (MPC) has maintained the key policy rate at 30 percent, while introducing additional liquidity management measures to address excess liquidity and reinforce the disinflation process. Announcing the committee’s decision on Monday following its 115th meeting, BoG Governor Dr. Ernest Addison said ...
See Details:
BoG holds policy rate at 30%, tightens liquidity measures
-
Renita Holmes has been displaced four times in the past three years by rising rents With sea levels rising around the globe, Miami, in the US state of Florida, is facing an urgent need to adapt. As property investors turn their gaze inland, away from the exclusive low-lying beach area, ...
See Details:
When sea levels rise, so does your rent
-
Picture2 In a groundbreaking moment, Mrs. Adelaide Siaw Agyepong, CEO-American International School, has achieved yet another milestone by being crowned ‘Icon of Inspiration and Impact for the Year 2023’. The crowning achievement took place in Accra, where Mrs. Siaw Agyepong surpassed contemporaries to clinch this prestigious title at the 5th ...
See Details:
American International School CEO honoured as ‘Icon of Inspiration and Impact’
-
Freetown’s streets were almost empty on Sunday after a curfew was imposed Gunmen in Sierra Leone attacked a military barracks and freed hundreds of prisoners in a “co-ordinated and properly planned” attack, the country’s information minister has said. Sierra Leoneans spent Sunday under a nationwide curfew amid disarray in capital ...
See Details:
Sierra Leone prison breaks co-ordinated - minister
-
Freetown’s streets were almost empty on Sunday after a curfew was imposed Gunmen in Sierra Leone attacked a military barracks and freed hundreds of prisoners in a “co-ordinated and properly planned” attack, the country’s information minister has said. Sierra Leoneans spent Sunday under a nationwide curfew amid disarray in capital ...
See Details:
Address the rise of single parenthood
-
Freetown’s streets were almost empty on Sunday after a curfew was imposed Gunmen in Sierra Leone attacked a military barracks and freed hundreds of prisoners in a “co-ordinated and properly planned” attack, the country’s information minister has said. Sierra Leoneans spent Sunday under a nationwide curfew amid disarray in capital ...
See Details:
Hyundai Chief Picked as Auto Industry Leader of the Year
-
Freetown’s streets were almost empty on Sunday after a curfew was imposed Gunmen in Sierra Leone attacked a military barracks and freed hundreds of prisoners in a “co-ordinated and properly planned” attack, the country’s information minister has said. Sierra Leoneans spent Sunday under a nationwide curfew amid disarray in capital ...
See Details:
Unmarried People Under 35 Outnumber Married Ones
-
Freetown’s streets were almost empty on Sunday after a curfew was imposed Gunmen in Sierra Leone attacked a military barracks and freed hundreds of prisoners in a “co-ordinated and properly planned” attack, the country’s information minister has said. Sierra Leoneans spent Sunday under a nationwide curfew amid disarray in capital ...
See Details:
European interior ministers in Hungary to discuss migration
-
Freetown’s streets were almost empty on Sunday after a curfew was imposed Gunmen in Sierra Leone attacked a military barracks and freed hundreds of prisoners in a “co-ordinated and properly planned” attack, the country’s information minister has said. Sierra Leoneans spent Sunday under a nationwide curfew amid disarray in capital ...
See Details:
Japan on the watch for unlicensed taxis around Narita airport amid foreign tourism spike
-
Freetown’s streets were almost empty on Sunday after a curfew was imposed Gunmen in Sierra Leone attacked a military barracks and freed hundreds of prisoners in a “co-ordinated and properly planned” attack, the country’s information minister has said. Sierra Leoneans spent Sunday under a nationwide curfew amid disarray in capital ...
See Details:
ECOWAS to send high-powered delegation on solidarity visit to Sierra Leone
OTHER NEWS
Despite doing education at the university, Mellon Kenyangi, also known as Mama Bear, did not think of going to class, and teaching students was her dream job.“Since it was not ...
Read more »
213 Sri Lanka Cricket’s Chairman of Selectors, Pramodya Wickramasinghe reported to the Sports Ministry’s Special Investigation Unit( SMSIU) for the Prevention of Sports Offences yesterday for the second day. He ...
Read more »
137 Malindu Dairy (Pvt) Ltd., a leading food production company in Sri Lanka, won the Silver Award in the medium-scale dairy and associated products category at the Industrial Excellence Awards ...
Read more »
Africans Urged to Invest Among themselves, Explore Investment Opportunities in Continent Addis Ababa, November 27/2023(ENA)-The Embassy of Angola in Ethiopia has organized lecture on the “Foreign Investment Opportunities in Angola ...
Read more »
144 The dynamic front row player Mohan Wimalaratne will lead the Police Sports Club Rugby team at the upcoming Nippon Paint Sri Lanka Rugby Major League XV-a-side Rugby Tournament scheduled ...
Read more »
Dozens of people living with disabilities from New Hope Inclusive in Entumbane, Bulawayo on Saturday last week received an early Christmas gift in the form of groceries. The groceries were ...
Read more »
The East African Community (EAC) Summit of Heads of State has admitted the Federal Republic of Somalia to the regional bloc, making it its 8th member country. The decision was ...
Read more »