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Morning Coffee: HSBC's new transparent bonuses plan will be opaque. Deutsche Bank's all new American expansion

When people working in financial services pass the CFA exams, they're given an indication of how they scored both relative to the pass rate and to the top and bottom decile of CFA exam takers. If you're junior and you work in particular jobs at HSBC, a similar principle will soon apply to your bonus.

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Bloomberg reported yesterday that HSBC is introducing a new system of target bonuses for people at grades four to eight. Eight is an entry level graduate, four is a vice president, so a large swathe of the bank will be affected. 

Those receiving the target bonus guidance, who will not be in the front office, will be given a number for their "on target variable pay" (bonus) and will be able to see how their own bonus compares to it. The on target variable pay will be derived from an amalgam of pay received by peers at HSBC and pay received by peers at other banks. 

While this sounds hypothetically transparent, it has the potential to not be. Averages can be massaged. HSBC juniors' new bonus targets will depend entirely upon who's defined as peers internally and which banks HSBC compares itself to. If internal peers are defined divisionally and external peers are defined as being at Lloyds or NatWest, bonus targets will be low indeed. If internal peers are defined as being specifically in trading technology and external peers are at Goldman Sachs or JPMorgan, targets will be much higher. HSBC gets to choose. Chances are the target will be simply be horribly generic, and it doesn't apply to the front office anyway.

Separately, Deutsche Bank is still growing, but while last year was all about hiring investment bankers under Fabrizio Campelli, this year seems to be all about hiring traders under Ram Nayak.

Speaking to International Financing Review, Nayak said yesterday that Deutsche has an ambitious expansion strategy across the Americas and that it wants to grow across US agency mortgages, interest rate swaps, commercial paper and Latin America. The German bank's operation is "lean" says IFR, there's potential to grow the US salesforce in particular. 

Some things are already going well: IFR says high yield bond trading at Deutsche is up 10 times in "recent months;" US rates trading revenues have doubled since 2019. Some of this might be the result of adding "more than 20 salespeople and traders over the past 18 months," many of them from Credit Suisse.  

Meanwhile...

HSBC CEO Noel Quinn has been warning people internally about coming headwinds in China and Hong Kong. (Bloomberg) 

Olek Gajowniczek, Nomura's deputy head of rates trading for Europe, is leaving the bank. (Bloomberg) 

Now that syndicated loan and junk bond markets are open again, US banks are now so desperate to win leveraged buyout financing deals that some are pitching for subordinated debt deals — the riskiest type of underwriting. (Bloomberg)  

Michael Dell is supporting 5C Investment Partners, a private credit fund founded by Tom Connolly and Mike Koester from Goldman Sachs. (Financial Times) 

JPMorgan appointed Rachid Alaoui as its head of equities. He was previously head of global equity derivatives trading at the bank. (The Trade) 

In the 1980s it was UK manufacturing that moved overseas. Now it's banking and consulting jobs that are at risk. (Bloomberg)  

When he was at college, 33-year-old Andy Lee intentionally studied a masters degree in accounting because it required little in-person attendance and had an open-book final exam. Today he is the king of a little known investment product called tax receivable agreements. (WSJ) 

"Childcare spending is my number one financial priority. We can’t afford a holiday this year, despite having a joint household income of £165,000.” (Financial Times) 

“It’s a balancing act for a lot of European banks, particularly after two years of poor performance for investment banking. There’s only so long you can keep paying expensive talent in the hope that revenue will recover.” (Financial News)  

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AUTHORSarah Butcher Global Editor

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