Pay surges as OCBC and UOB close earnings gap with DBS

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Pay surges as OCBC and UOB close earnings gap with DBS

UOB and OCBC are closing the pay gap with their larger local rival, DBS, although they still have plenty of ground to make up. Staff costs per head – total employee expenditure (such as salaries and bonuses) divided by total headcount – rose 7% and 8% year on year at UOB and OCBC, according to their 2017 financial results, which were both released on Wednesday.

UOB spent S$88,475k on its average employee in 2017, compared with S$82,485 the previous year. Per-head expenses at OCBC jumped from S$78,780 to S$84,699 over the same period.

But while the two banks’ cost increases are similar, the reasons behind them are not.

OCBC has a smaller overall headcount than in 2016, but now boasts a higher proportion of expensive front-office staff within its workforce because of its purchase of Barclays’ Asian wealth unit. The deal was completed in November 2016, so it wasn’t until 2017 that OCBC felt the “full year cost impact from the consolidation”, according to its earnings report. While a few Barclays bankers joined Standard Chartered before the takeover took place, most of them moved across to Bank of Singapore, OCBC’s private banking unit.

By contrast, pay has increased at UOB largely because of new external hiring, which helped its headcount reach 25,137 by the end of 2017, an increase of 284 people year on year.

As we’ve been reporting over the last six months, much of UOB’s recent recruitment has focused on Singapore-based technology roles. Salaries are rising more rapidly in tech than in most other functions as banks like DBS, Standard Chartered, Citi and UOB increase hiring in the face of local skill shortages and growing competition from technology companies. UOB is taking on more engineers, analysts, digital designers, architects, project managers and data scientists, Susan Hwee, head of group technology and operations, told us in September.

The bank appears to have been hiring in global markets, too. A 4% rise in total expenses within the division was pinned on “staff related costs”. And bonuses are up across the bank – “performance-related staff costs” were higher in 2017 than in 2016, according to UOB’s annual report.

The cost increases at UOB and OCBC mean they are narrowing the earnings gap with DBS, where per-head compensation fell by 5% over the same period as it took on cheaper staff in India and in retail banking, following the acquisition of some of ANZ’s Asian businesses.

As the table below shows, however, DBS – whose front-office operations are larger than those of its rivals – remains the best paymaster among the three Singapore banks.

Image credit: mihtiander, Getty

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