* HSBC drops 2016 pay freeze plans, keeps hiring freeze
* Pay rises to be funded from bonuses intended for 2017
* UBS this week freezes investment bank salaries-sources
* CEO Gulliver in memo cautious on 2016 revenues (Adds context on banking jobs, more from memo)
By Carolyn Cohn and Richa Naidu
LONDON, Feb 11 (Reuters) - HSBC, Europe's largestbank, has dropped plans to freeze pay this year, according to amemo by Chief Executive Stuart Gulliver seen by Reuters,reversing a cost-cutting decision made less than two weeks ago.
The memo, in which Gulliver expresses caution on the outlookfor HSBC's revenues this year, comes at a significant time, daysbefore HSBC's board is set to meet to discuss whether the bankwill move its headquarters to Hong Kong or stay in London.
Pay rises will be funded from a bonus pool originallyintended for payments to be made in 2017, the memo from Gulliverto all employees and dated Feb. 11 said.
A hiring freeze introduced in the fourth quarter of 2015will remain in place.
The bank, which had more than 266,000 staff at the end of2014, plans annual cost savings of up to $5 billion by 2017.
"As flagged in our Investor Update we have targetedsignificant cost reductions by the end of 2017," a spokeswomanfor HSBC said in a statement.
Gulliver said that following feedback on the pay freeze andthe way it was communicated, he had "decided to change the waythese cost savings are to be achieved".
"We will therefore proceed with the pay rises as originallyproposed by managers as part of the 2015 pay review, notingthat, consistent with prior years, not all staff will receive apay rise."
Bonuses for 2015, which are due to be paid in 2016, will notbe affected, the memo said.
Two sources familiar with the matter told Reuters last monththat HSBC was imposing a hiring and pay freeze across the bankglobally in 2016.
Gulliver also highlighted in the memo his concerns for theglobal economy from falling oil prices and slowing Chinesegrowth, as well as lower growth expectations for Britain.
"These macroeconomic pressures mean we must be cautious andrealistic about the outlook for our revenues in 2016," the memosaid.
Worries about global growth have heaped pressure on thebanking sector in recent months.
"Several of our competitors have recently announcedlarge-scale redundancies, salary freezes, bonus reductions andfurther cost reduction programmes in addition to those alreadyin place and hence it is clear we are not alone in facing thesechallenges," Gulliver said.
Swiss bank UBS is imposing a pay freeze across itsinvestment banking arm, two sources familiar with the mattertold Reuters this week, while Deutsche Bank said lastmonth it had scrapped board bonuses this year after posting arecord loss for 2015.
Ten of Europe's biggest banks announced staff cuts of130,000 in the second half of 2015, according to data compiledby Reuters, more than the total number of job losses announcedby those banks in 2013 and 2014.
Investors believe, however, that the industry will need toslim down further and faster to boost profits. (Reporting by Carolyn Cohn and Richa Naidu; Editing by RachelArmstrong, Keith Weir and Adrian Croft)