LONDON (REUTERS) - HSBC, Europe's largest bank, has dropped plans to freeze pay this year while remaining cautious on the outlook for its revenues, a memo from Chief Executive Stuart Gulliver seen by Reuters said on Thursday.

The memo comes days before HSBC's board is set to meet to discuss whether the bank will move its headquarters to Hong Kong or stay in London.

Pay rises will be funded from a bonus pool which was originally intended for payments to be made in 2017, the memo from Mr Gulliver said. A hiring freeze will remain in place. "As flagged in our Investor Update we have targeted significant cost reductions by the end of 2017," a spokesman for HSBC said in a statement.

The bank, which had more than 266,000 staff at the end of 2014, plans annual cost savings of up to US$5 billion (S$6.9 billion) by 2017.

Mr Gulliver said that following feedback on the pay freeze and the way it was communicated, he had "decided to change the way these cost savings are to be achieved".

"We will therefore proceed with the pay rises as originally proposed by managers as part of the 2015 pay review, noting that, consistent with prior years, not all staff will receive a pay rise."

Bonuses for 2015, which are due to be paid in 2016, will not be affected, the memo said.

Two sources familiar with the matter told Reuters last month that HSBC was imposing a hiring and pay freeze across the bank globally in 2016.

Mr Gulliver highlighted in the memo his concerns for the global economy from falling oil prices and slowing Chinese growth, as well as lower growth expectations for Britain. "These macroeconomic pressures mean we must be cautious and realistic about the outlook for our revenues in 2016," the memo said.