HSBC has increased its bankers’ bonus pool and announced fresh shareholder payouts after profits grew by more than fourfold in the second quarter, thanks to an economic rebound in key markets, including the UK.
The London-headquartered bank said it hadincreased its banker bonus pool by $900m in order to compensate its star staff in the first half of the year, compared with a $600m increase during the same period in 2020 when its profits suffered from the onset of the Covid-19 crisis.
Its top bankers will have another six months to increase the bonus pool before it is paid out next spring. Last year, HSBC paid 324 of its bankers more than €1m (£854,000), including bonuses, while eight received more than €5m. One unnamed banker was given between €9m and €10m, roughly double the £4.2m paid to its chief executive, Noel Quinn, for 2020.
HSBC said the increase in the bonus pool reflected its strong performance, as pre-tax profits swelled to $5bn in the three months to 30 June, up from $1bn a year earlier when it put aside billions of pounds to cover potential defaults linked to the pandemic.
The bank said improving economic forecasts, particularly in the UK, meant it could release $284m worth of loan loss provisions, compared with the $3.8bn it had put aside to cover potential bad debts during the same period in 2020.
“The UK economy has rebounded strongly in the first half of this year,” Quinn said.
“Much credit must go to the vaccination programme that is supporting the UK economy rebound, and the UK government has done well in getting such a high coverage of vaccination. So it is encouraging and we’re positive about the second half of the year for the UK economy.”
However, HSBC said that uncertainties still remain, “as countries respond at different speeds, government support measures unwind and new virus strains test the efficacy of vaccination programmes”.
Regardless of the uncertainty, the bank confirmed it would pay its investors a dividend worth seven US cents a share, making it the latest UK lender to take advantage of looser Covid rules around shareholder payouts.
The Bank of England ordered the UK’s largest banks not to pay cash bonuses to senior staff and to suspend dividend payments last year to preserve capital and ensure lenders could support the British economy in case of a big economic downturn.
“These are good results that reflect the return of growth in our main markets and marked progress in the execution of our strategy,” Quinn said.
In the UK, Quinn said HSBC experienced a record quarter for mortgages, with lending having grown a total of 9% or $5.1bn since June last year. It helped push overall mortgage lending up 7% during the year to $24bn, across the entire group.
The mortgage lending figures cover the final months of the temporary stamp duty holiday, which was introduced to support the UK housing market during the Covid-19 crisis but contributed to rising house prices that forced some borrowers to take out larger home loans. UK house prices hit a new high in June and were 30% higher than the peak they reached before the 2008 financial crisis, according to Zoopla. The stamp duty waiver has ended in Wales and Scotland, and has been lowered in England and Northern Ireland before finishing in September.
HSBC said it expects UK GDP to grow by 6.1% in 2021, with the unemployment rate reaching an average of 5.8% by the end of the year. It forecasts that annual house prices will jump by 8.3% on average.