Morning Coffee: HSBC bankers said to earn 7 figures doing nothing. The secret shame of Wall Street’s socialists

HSBC bankers aren't badly paid. The average material risk-taker (MRT) at HSBC's investment bank, including senior bankers and traders, earned $1.4m in 2024. According to some of their colleagues, they didn't do much to earn that. 

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Now that Georges Elhedery, HSBC's CEO has decided that HSBC is an Asian bank with a global footprint, instead of a global bank with an Asian franchise, and is cutting M&A and ECM in Europe and the US, HSBC's remaining bankers are casting aspersions on their colleagues who are leaving. 

One senior executive at the bank tells the Financial Times they weren't doing any work anyway, and were paid handsomely for it. "We’ve done two equity deals outside of the Middle East and Asia and we had a couple we were working on. That’s it […]Yet we had dozens of people and they all got paid seven figures and we haven’t made any money there, ever,” he says starkly.

It's a comment that provides some cover for Elhedery's controversial decision. For a bank of HSBC’s size, it’s quite unusual to adopt a business model which doesn’t let you serve all your clients needs in all their geographies.  And maintaining a lot of balance sheet heavy financing products without the advisory franchise to monetise them is also a risky approach.  Some commentators think there’s a significant danger that HSBC's remaining bankers end up being treated as the equivalent of the Las Vegas casino where everyone shows up to take advantage of the cheap drinks offers then goes to gamble elsewhere.

Insiders say that something had to be done; it’s one thing to support a franchise that barely covers its cost of capital across the cycle, but quite another to keep on investing in an advisory franchise that hasn’t got anyone to advise. 

And while it's possible there's some hyberbole in the claim that HSBC had "dozens" of people doing nothing, there may also be somet truth in it. The whole HSBC group had 535 Material Risk Takers earning the average of $1.4m total compensation in 2024, so it’s just about possible that the ECM team had “dozens” of people earning seven figures (although this would raise questions about why they were getting bonuses, as the average MRT basic pay was just over €600k).  And it’s noticeable that the anonymous speaker commented about “equity deals” in an extremely weak year for IPOs.  The story with respect to M&A wasn’t so bad; UK head Kamal Jabre personally appeared in a Bloomberg analysis of “deal captains” as having been associated with nearly $14bn worth of transactions.

But the big picture is pretty damning; analysts estimated that the US and European ECM and M&A franchises might not have done much more than $125m of revenue. Even if it was only one dozen seven-figure MDs and no other costs, it was losing money.

Whether HSBC's bankers were doing nothing while they were losing money is another question, though. There's always a lot to do, even if it just amounts to talking to clients and building a pipeline with a view to doing a deal in the future. 

It’s noticeable that many HSBC bankers were quite eagerly snapped up by other firms.  The decision to cut rather than attempt to turn the franchise around might not be looked on so kindly in future years.

Elsewhere, it’s usually a good rule to keep your political views to yourself in banking at the best of times.  When a self-proclaimed “socialist” has just won the Democratic primary to be Mayor of New York, though, it’s an even better time.  Lots of bankers appear to have forgotten the phrases “sense of perspective” and “only local government” and gone into full “Commie Summer” panic mode about Zohran Mamdani’s surprise victory (complete with some of the most woeful memes that social media has ever seen).

So it appears that Mamdani supporters in the investment banking industry have taken the wise course of not drawing attention to themselves.  Three software engineers at Goldman Sachs gave his campaign enough money to have appeared on the official financial disclosure website, but they weren’t giving interviews about their reasons for doing so, and nor were any other bankers that anyone could track down.  (Except one who tried to use a false name).  There may be a Wall Street branch of Democratic Socialist Bankers of America, but it’s currently a well-kept secret.

Meanwhile …

Jefferies bankers are having “an abundance of discussions with clients around capital formation, strategic opportunities and their need to transact”, according to CEO Rich Handler, and if you didn’t spot that this means “no deals”, back to school. Geopolitical risk greatly affected transactions in their second fiscal quarter, which is doubly painful for a bank that’s carrying the cost of the last few years’ aggressive hiring.  But the management remains optimistic about the pipeline of business that’s ready to do through.  Just as soon as the uncertainty reduces … (Bloomberg)

Get invited out for a glass of wine that turns into a marathon job interview, text a rival employer from the bathroom at 2:30 am, then burst into tears after having been bullied into accepting an offer.  Incomprehensibly, someone who has been through the private equity “on cycle” recruiting process still thinks it’s a good way to hire. (Business Insider)

Ken Moelis sees the world getting “better every day”, thinks that Europe’s response to the election of Donald Trump might trigger a five year boom and wouldn’t be surprised if his firm increases its staffing in London by 50% (Bloomberg)

A new hire from Barclays, departure of a co-head, the head of FIG taking a “chairman” role and numerous shuffles and promotions – UBS seems to be gearing up in its financial sponsors team, in a way that might indicate more hiring to come. (Financial News)

If you want to find the smartest person from Preston, don’t look in Preston. (It’s Mike Platt and he’s in Dubai).  Survey data shows that the top 5% of students from schools all over England almost invariably leave their home town before the age of 30, usually to go to London. (Times)

Being dragged into an arms-smuggling case after a humanitarian donation went wrong is bad enough, but Jane Street co-founder Robert Granieri must find it really hurtful to see his firm described as “probably best known as the former employer of Sam Bankman-Fried”(Bloomberg)

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