Morning Coffee: Barclays' CEO bonus changes carry an omen for the investment bank. HSBC's 400 job cuts blamed on politics

Barclays hasn't announced its 2024 bonuses yet, but when it does, there are signs that they could be a bit different. 

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Barclays lifted the European Union's bonus cap in August 2024, to allow for bonuses to become ten instead of two times salary for its material risk-takers (managing directors and other people of import). Yesterday, Sky News reported that Barclays' CEO, C.S. Venkatakrishnan (Venkat), is getting the same treatment. 

Venkat is becoming eligible for bonuses that are worth eight times his fixed pay, instead of two times his fixed pay last year. If all goes well, Venkat's bonus for 2025 could be £12.4m, up from less than £2m in the recent past. Exciting.

Such things do not come without their own challenges, though.  While Venkat's potential bonus is being increased, the salary and allowance he was previously receiving no matter what, are being cut. Last year he got £2.95m. This year, his salary and allowance will be £1.59m instead.

Unfortunately, there's no guarantee that Venkat's bigger £12.4m bonus will be forthcoming. As with any bonus, this is contingent on performance, and in Venkat's case the performance criteria sound a bit ominous for the investment bank. 

The Financial Times notes that if he's to achieve his full £12.4m bonus, Barclays commands that Venkat must achieve a return on tangible equity across the bank of 14%. If he wants a £9m bonus, he must achieve a return on tangible equity of 12%, the bank's current target. 

This is ominous, because Barclay's investment bank has long been a drag on its overall return on equity. In late 2023, there were suggestions that Venkat was being pushed to achieve a sustainable 14-15% return on equity (RoE) in Barclays' investment bank alone, even though this had never been achieved before. A 14% returns target across the organization is less challenging, but will still focus minds on the fact that the investment bank is dragging things down.

In the third quarter, for example, the RoE in Barclays' investment bank was just 8.8% - below its cost of equity; for the bank as a whole it was 12.3%. 

If you're Venkat and you want your newly big bonus in full, it might therefore be easy to conclude that the investment bank is your problem. First, you might try boosting businesses that generate returns and that don't use capital (eg. M&A advisory). Second, you might try encouraging businesses to be more capital efficient. Thirdly, you might cut capital intensive businesses altogether. 

Bonuses are back at Barclays. But be careful what you wish for. 

Separately, HSBC is cutting jobs under CEO Georges Elhedery, but some of the cuts seem to have a curious provenance. 

Financial News reported yesterday that HSBC is closing Zing, its payments app which was supposed to challenge the likes of Wise and Revolut. 400 jobs are going, mostly in customer services. 

HSBC has presumably decided that the app - which it spent $150.5m on, was too expensive. But there seems to be a political angle too. Financial News notes that app was a pet project of Nuno Matos, the former head of HSBC's wealth and personal banking unit. Matos left HSBC last August after losing a battle for the CEO job with Elhedery. Now the victor is killing his expensive baby.

Meanwhile.... 

Star technology banker Michael Grimes is in discussions to leave Morgan Stanley and work for Trump. He's closed to Elon Musk and specializes in IPOs but there haven't been many IPOs recently. (WSJ) 

Jamie Dimon had a party in Davos. He wore jeans, black trainers with a dark jacket and a light-blue shirt and served Laurent-Perrier Champagne or Lurlibad chardonnay, hamburgers, risotto and beef slices with mashed potatoes. (Bloomberg) 

Jamie Dimon's pay increased 8% to $39m. (Financial Times) 

Goldman Sachs promoted 17 executives this month but only three are women and only one of the women is in a revenue generating role. (Bloomberg) 

Ex-Millennium portfolio manager Robert Bonte-Friedheim is launching a London-based Scarlet Macaw Capital. It will begin trading during the second quarter with $200m. (Financial News) 

Adults with ADHD die younger than the rest. “Adults with ADHD are more likely to engage in unhealthy habits such as binge-eating or smoking, and risk-taking behavior. There may also be biological links with autoimmune and other physical health disorders.” (Bloomberg) 

JPMorgan people are till complaining about time in the office. "I’m really against the full RTO out of empathy for a lot of colleagues whose personal lives will be upended. A lot of us have arranged our lives and [made] huge life decisions around being able to be remote a couple days a week or 40% of the time.” (Yahoo) 

Beware unlimited vacation days. “Unlimited PTO sounds great. It’s complete B.S. because you’re afraid to use it.” (WSJ) 

How to live in Brooklyn on a household income of $450k a year when your parents gave you a $250k house deposit. (The Purse) 

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