LONDON â€" As it reported a profit for last year that fell short of analysts’ estimates, HSBC on Monday laid out how it was changing its compensation for senior executives, becoming the first major bank here to describe how it was circumventing a new European Union cap on bonuses.
The London-based HSBC said that it would award 665 of its senior managers â€" including its chief executive, Stuart T. Gulliver, and Iain Mackay, the chief financial officer â€" a fixed-pay allowance as part of their compensation. The allowance, which qualifies neither as a salary nor a bonus, would be exempt from recent European Union rules that limit bonuses to twice a senior employee’s salary.
Banking giants in London, including Barclays but also Goldman Sachs and Bank of America Merrill Lynch, have been seeking new ways to compensate their senior staff after efforts by the financial services industry to lobby in Brussels against the new bonus rules failed.
HSBC on Monday also reported that it had missed some of its own cost-cutting targets as revenue fell. HSBC’s shares were down 3.6 percent in London on Monday afternoon.
HSBC, one of Europe’s largest lenders, said pretax profit for 2013 rose 9 percent to $22.6 billion from $20.7 billion in the year earlier. A group of analysts surveyed by Bloomberg had expected earnings to rise to $24.6 billion. Revenue fell 5.4 percent in the year.
“The results were at the lower end of expectations, with difficulties in Latin America taking their toll,†Keith Bowman, an analyst at the stockbroker Hargreaves Lansdown in London, said. “Furthermore, some management efficiency targets were missed.â€
Mr. Gulliver has closed or sold 63 businesses or investments since 2011 as he plans to focus on corporate finance products and services for faster-growing markets, including Asia and Latin America. As part of the cost-cutting measures, the bank also eliminated about 40,000 jobs.
But lowering costs is taking more time than the bank and analysts expected. Return on equity, a measure of profitability, was 9.2 percent in 2013, short of Mr. Gulliver’s own goal of more than 12 percent.
The bank said it would continue with the strategy it announced in 2011 to cut costs, increase dividends and improve its risk and compliance controls to avoid any potential threat from financial misdeeds. HSBC said it planned further cost savings of $2 billion to $3 billion by improving some of its processes and procedures.
The earnings “reflected the good progress we have made in implementing the strategy that we set out in 2011,†Mr. Gulliver said in a statement.
HSBC said it paid Mr. Gulliver a bonus of 1.8 million pounds, or $3 million, for last year. That compares with £700,000 for 2012, when HSBC agreed to a fine to settle charges with United States authorities that the bank breached rules against money laundering.
HSBC, which generates most of its earnings from Asia, said the “sharp sell-off†in some emerging markets was more “a reflection of specific circumstances rather than a generalized threat.†But it predicted developing economies would experience “greater volatility in 2014 and choppy markets as adjustments are made to changing economic circumstances and sentiment.“
HSBC’s business in Latin America was hurt by slower economic growth last year. But Mr. Gulliver said he remained “optimistic about the long-term prospects of emerging markets and the opportunities for HSBC.â€
“HSBC should benefit from the continuing growth in international trade as well as increasing wealth in Asia, Latin America, and the Middle East,†Shannon Stemm, an analyst at brokerage firm Edward Jones in the United States, said.
