British bank Barclays
on Tuesday set out savings and cost-income ratio (CIR) targets that also fell short for some investors.
Barclays
(BARC.L), said it hoped to shave around 2 billion pounds off its costs over the next three years, lowering its CIR to "high-50s" by 2026, from 63% at end-2023.
HSBC Chief Executive Noel Quinn said his bank was navigating the cost strains better than the surprise overspend implied, with its CIR for 2023 down to 48% last year, from 64% in 2022.
Asset sales were also proving a useful cost management tool.
"We are actually selling a billion dollars worth of costs," Quinn said, pointing to sales of HSBC's French retail and Canadian arms which were completed in recent weeks.
"We continue to try and offset investment in the business for growth and efficiency reasons with savings elsewhere," Quinn added on a media call.
Other European banks have also felt the squeeze. Credit Agricole
(CAGR.PA), opens new tab this month reported a 15% jump in year-on-year underlying operating expenses in its fourth quarter, more than expected, and flagged a further 8% rise in costs for 2024.
Deutsche Bank said
on Feb. 1 it would cut 3,500 roles as it tackles a 75% CIR and a 6% rise in 2023 non-interest expenses.
COMPENSATION
The Oliver Wyman and Morgan Stanley report said that global banks could redesign their workforce to clarify roles and align compensation, while corporate specialists should trim regional footprints to prioritise on recession-proof revenues.
As inflation continues to pressure their returns, some investors and analysts said bank executives needed to exercise restraint on share buybacks and pay, pending further progress on broader savings and in case of possible economic shocks.
"Buybacks artificially inflate earnings per share, potentially leading to unsustainable practices over quarterly periods," Allen He, Research Director at FCLTGlobal, told Reuters, in comments about companies in general.
Meanwhile, compensation is being viewed as an increasingly significant component of banks' rising cost bases.
A
report on Feb. 8 from shareholder advisory firm Glass Lewis said it would "carefully review the strategic rationale for any rebalancing of bankers' pay packages" in view of changes to regulation that removed caps on bonuses.
Quinn saw his total pay double in 2023 to $10.6 million from $5.6 million the year before, as long-term incentives from his appointment in 2020 began to vest, boosting his variable pay.
HSBC's bonus pool rose to $3.8 billion from $3.4 billion in 2022, reflecting improved performance, and it would launch a variable pay scheme for junior and middle management staff.
That contrasted with Barclays where the bonus pool dipped 3% in 2023 to 1.75 billion pounds and CEO C.S. Venkatakrishnan saw his total pay fall from 5.2 million pounds to 4.6 million.
The Glass Lewis report said it would "generally expect increases in variable incentive opportunity to be accompanied by an appropriate reduction in fixed pay", adding that the first bank to propose substantial changes may act as a litmus test.
"If an overhaul of pay is well-supported by shareholders, the other banks' interest may well be piqued," it said.
Reporting by Sinead Cruise and Lawrence White; Editing by Alexander Smith