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HSBC Likely to Cut 2020-End Bonus by 22.5% on Coronavirus Impacts

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HSBC Holdings (HSBC - Free Report) is mulling to cut bonus for junior staff globally by 22.5% for 2020, in order to cope with the impact of coronavirus-induced slowdown and near-zero interest rates on business. The news was reported by South China Morning Post.

The cuts are being planned for the frontline and back office employees, who have a streamlined variable pay structure with grades 6 to 8. Notably, the article reported that top performers in this grade range will be entitled to a bonus of to about 2.3 times one month's salary. This is a discretionary bonus paid out in February every year, based on the employee’s performance and behavior ratings.

Citing a memo seen by the Post, the lender is cutting back incentives due to a significant fall in profits as witnessed in the first three quarters of 2020. HSBC saw about 62% plunge in profits in the first nine months.

The decline in variable pay of only 22.5% "reflects the exceptional performance of staff in supporting customers and each other and helping to build the bank for the future," the article quoted a spokeswoman. Also, she informed that total compensation for affected employees is mostly flat or slightly up from the previous year as a result.

Bonus Plans of Other Banks

Last month, plans of other Wall Street banks for 2020 bonuses also came into light. Deutsche Bank (AG - Free Report) is mulling to reward traders at its fixed income unit for a striking performance in the current year, despite the pandemic-related concerns. The bonuses are likely to be raised about 10%.

Bank of America’s (BAC - Free Report) , however, despite recording impressive performance at the sales and trading division during the year, is planning to keep 2020-end bonuses flat year over year.

Another Wall Street biggie JPMorgan (JPM - Free Report) plans to boost year-end compensation for its sales and trading division by up to 20%.

Our Take

HSBC’s efforts to streamline business are encouraging. Also, initiatives to improve market share in the U.K. and China are likely to support financials. However, the global economic slowdown, low interest rate environment across the globe and weak loan demand are likely to hamper revenue growth.

Shares of HSBC have rallied 19.3% over the past three months, outperforming the industry’s growth of 33.6%.

Currently, HSBC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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