Investment banks in Hong Kong, spooked by market turmoil in China, are set to slash their bonus pools and exclude more staff from any sort of bonus payment. Only Goldman Sachs and Citi are tipped as being (comparatively) generous with their 2015 Hong Kong bonuses.
“There will be some winners, but overall bonuses will fall about 10% compared with 2014,” says a Hong Kong headhunter who asked not to be named. “If your bonuses stays about the same, that’s the equivalent of a rise in previous years – you should actually be happy.”
He expects more bankers than last year to miss out entirely on a bonus. Poor performers – if they don’t get laid off – will almost certainly be given donuts, and an increasing number of average achievers will fall into (or close to) the zero-bonus bucket. Only “isolated superstars” might do well and receive bonuses of a similar size to their base salaries, says another Hong Kong headhunter.
Yet just six months ago Hong Kong’s investment bankers had fairly high hopes for their bonuses – buoyant Chinese stock markets helped the Asian region fuel first-half profits at global investment banks. “Business performance is key to bonuses. The stock market was strong in Q1 and Q2, but dipped towards the year end,” says Nick Lambe, managing director at Links International in Hong Kong.
While Hong Kong is set to end the year as the world’s leading market for initial public offerings (IPOs), overall market conditions are ensuring most banks remain cost conscious. “Too many of the drivers of bonuses have worsened since the start of the year – the turmoil across Chinese stock markets in the second half, China’s IPO freeze, slowing Chinese economic growth, and generally more negative investment attitudes in the mainland,” says Eunice Ng, director of search firm Avanza Consulting in Hong Kong.
Some firms are bucking the downward bonus trend. Another recruiter, speaking on condition of anonymity, says Citi will generally keep bonuses flat in Hong Kong, following reports that it’s doing the same globally. “Goldman Sachs is the only house I know that is paying above-market bonus to their top performers,” he says. Goldman ranks first for year-to-date M&A and second for ECM in ex-Japan Asia, according to Dealogic data.
By contrast, if you’re working at a firm in the midst of making mass redundancies – Barclays and Deutsche Bank, for example – your bonus is likely to be under the market average. “I know that at HSBC and Standard Chartered the Hong Kong bonus pool will definitely be at lot smaller than last year,” adds the recruiter. Lambe from Links International says the worst performing banks may have to trim Hong Kong bonuses by up to 20% - about double the average sector-wide reduction.
“The massive expansion of global IBs in Hong Kong, which started 10 or so years ago and helped drive up bonuses, is now over,” says the first headhunter. “A lot of Hong Kong bankers will privately admit that they agree with bonuses coming down. And I agree with John Cryan’s recent remarks – the reality is that in investment banking your salary is high anyway and only a minority of top producers should get a high bonus. The rest are just riding on their coattails.”