Back in November we cautioned that bonuses in Asia, particularly at European banks, were set to slide for 2018. Now, as the bonus-payment season kicks off after Chinese New Year, two European banks – UBS and Natixis – look like they are indeed cutting back their bonus pools.
UBS has trimmed its 2018 Asian pool by about 8% because of a decline in equity offerings in the fourth quarter that reduced fees, reports Bloomberg.
Could other banks follow suit and reduce bonuses, particularly for equity capital markets (ECM) bankers in Hong Kong, Asia’s ECM hub? Probably. Although Hong Kong enjoyed a bumper year for IPOs in 2018, some high-profile offerings toward the end of the year produced poor returns for investors, and there are fears that the listings bubble will burst in 2019. Across the market, ECM bonuses are expected to be down by as much as 30%, Bethan Howell, a team lead in investment banking at recruiters Selby Jennings, told us previously.
UBS’s reported bonus cuts also reflect two wider trends in the industry: managing directors will suffer the largest proportional bonus cuts; and compared with 2017, more executive directors will receive no bonus at all for 2018.
Across all firms and front-office job functions the bonus gap between top rainmakers and rank-and-file bankers is still growing in Hong Kong. “Each year performance goals become tougher and banks make sure the high performers are very well looked after, despite any overall cuts in their bonus pool,” says John Mullally, director of Hong Kong financial services at recruiters Robert Walters. “Banks’ attitude is that other people can always just leave if they’re dissatisfied with their bonus.”
Some UBS EDs with a zero bonus may well be looking out for new jobs in the next few weeks.
Meanwhile, Natixis has attributed the halving of its fourth quarter profits on Asian derivatives trades that went sour during difficult trading conditions that also affected its competitors. The French bank did not make specific reference to its bonuses, but it’s fair to assume that – in Asian equities in particular – the Q4 results may affect its bonus pool.
The Natixis results also bode badly for equities bonuses at other banks in Hong Kong, which recruiters have already tipped to fall. The Shanghai Composite Index ended last year 25% below where it started, making it the worst-performing major stock market in the world, reports Bloomberg. Hong Kong’s Hang Seng Index also fell last year, partly fuelled by US-China trade tensions.
Equity traders will likely see their bonuses slump by about 10%, Eunice Ng, director of headhunters Avanza Consulting in Hong Kong, told us in November. “Trading bonuses typically track the Heng Sang,” adds Mullally from Robert Walters.
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