Morning Coffee: HSBC is ready to pay its MDs $1.4m, again. It’s a terrible time to be a consultant, but not an auditor

In 17 years, HSBC has cut a lot of jobs. Writing at the weekend, the Times noted that in 2007, the bank employed 316,000 people. However, the last time HSBC divulged employee numbers in the summer, it was down to 221,000. - 95,000 HSBC staff have gone.

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The cuts are not over. In today’s third quarter results presentation, HSBC affirmed its intention of extracting another 5% from costs globally this year. Travel budgets are being squeezed and duplication between the investment bank and commercial bank is being eliminated under a new structure introduced by the new CEO, which has combined the two banks and ejected all sorts of people from the executive committee.  Having cut the fat, one senior banker told the Times that Georges Elhedery is coming for HSBC's vertebrae: "We had a skeleton to hold a 200lb gorilla, but the backbone — the infrastructure, the bureaucracy and the governance — has become just too heavy for the lean flesh. This is the natural conclusion. We’re going at the bones now.”

But while Elhedery is cutting, he's willing to be generous too. Bloomberg reported yesterday that HSBC's 2024 bonus pool is currently on track to match last year's record high. It seems that the material risk-takers and managing directors in HSBC's investment bank, will once again earn $1.4m+ each. 

On whom will these rewards be lavished most zealously? Today's third quarter results from HSBC show the bank's equities salespeople and traders having an excellent year, with revenues up 78% year-on-year in the first nine months. This is a market-beating performance: the closest rival (Citi) achieved a mere 24% increase in equities revenues over the same period. By comparison, though, HSBC's equity capital markets and M&A bankers are floundering: their revenues have barely budged this year.

The implication is that HSBC's Asia-based equities professionals have benefited from local market volatility, along with inflows from its wealth business. However, its investment bankers, who must arrange at least three meetings before getting on a plane, are struggling. Instead of lavishing large bonuses on them, HSBC may want to facilitate their client visits - or spend its money hiring some new ones 

Separately, Business Insider notes that consultants are having a hard time this year. Clients are spending less on consultants and consulting pay is falling. Consulting firms that added staff after the pandemic, are living to regret their zeal. 

While consultants are struggling, though, their simpler brethren are thriving. The FT notes that assurance and audit revenues at EY rose 10% last year, while in consulting and strategy and transactions EY's revenues were down 4% and 13% respectively.

Meanwhile...

Goldman Sachs opened a new office in Riyadh, and is saying things like: “We see significant opportunities to do business in Saudi and have ambitions to grow across Asset and Wealth Management and Banking and Markets.” (Bloomberg) 

Barclays is thinking of opening a new office in Saudi Arabia, too. (Bloomberg) 

Now BNP Paribas fired David Malvern, its US head of high yield trading, and others. (Bloomberg) 

British private equity professionals think they might not be hit too heavily by higher capital gains tax after all. “We are expecting there to be some change in the constraints of what actually carried interest really is, and what qualifies.” (Financial Times) 

A trader is using options on futures tied to the three-month Euribor funding rate that will pay out €37.5 million ($40.6 million) on an initial €6 million premium if policymakers reduce the deposit rate to 1.75% or lower by the middle of next year. (Bloomberg) 

EQT, the Swedish private equity firm that that refuses to move into private credit, is preparing to participate in a wave of consolidation in the private equity industry instead. (FT) 

Macho nerds and the "hidden optical fiber cable” beneath a private driveway in Ohio. (Alphaville) 

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