Morning Coffee: Another reason to quit investment banking in Hong Kong

If M&A bankers at investment banks in Greater China needed another motivation to move into the corporate sector, they now have one: the pay gap is narrowing.

“There is a clear trend towards bankers moving in-house,” Will Bown, director, investment banking APAC, at search firm Sheffield Haworth, told Euromoney. Compensation at investment banks is on a downward trend, he adds. “Hence, while there is still a gap in pay between in-house work and sell-side investment banking, the gap is narrowing, and some people are starting to question whether the premium is enough to justify the impact that banking hours has on their quality of life.”

Meanwhile, the rise of in-house M&A jobs in China and Hong Kong – which we first reported on in April last year – shows no signs of running out of steam. Larger Chinese companies continue to employ ex-bankers to devise acquisition-search strategies and conduct the initial due diligence on a takeover target. The most “enthusiastic proponents of adviser-free acquiring” are two of China’s most famous companies, Tencent and Alibaba, reports Euromoney. In Alibaba’s most recent 20 acquisitions, dating back to March 2014, it used advisers – Goldman Sachs, Morgan Stanley and Mizuho – only three times. Tencent’s chief strategy officer, James Mitchell, is a former Goldman Sachs banker who joined the Chinese company in 2011.

“The foreign investment banks have been losing M&A opportunities in China,” Keith Pogson, global assurance leader and senior partner, financial services, Asia Pacific at EY, told Euromoney. “There has been less paid in fees. And as returns on investment banking in China have been crushed, the investment banks have been downsizing their teams. The investment banks are in some cases being cut out of finder’s fee arrangements and are more being paid fees for negotiations and other services. The Chinese companies don’t need GPs anymore, they need specialists.”

But while investment banks are notorious for making layoffs, corporates aren’t guarantors of job security either. Bankers are advised to research the longer-term viability of any in-house roles they apply for. “If your company is no longer looking at doing acquisitions, your job becomes a waste of time for them – I have seen many cases of this,” Eunice Ng, director of talent acquisition at headhunters Avanza Consulting in Hong Kong, told us previously.

Meanwhile:

Mitsubishi UFJ Securities HK has appointed Ryosei Hayashi as head of rates trading. (Finance Asia)

UOB sets up cross-border yuan solutions unit. (Business Times)

BlackRock expects to get S$4bn for Singapore’s Asia Square Tower 1, whose tenants include Citigroup. (Bloomberg)

HKEx extends CEO Charles Li’s contract by three years. (Reuters)

China says it’s in no rush to lift capital controls on the yuan. (Wall Street Journal)

DBS plans to issue Singapore’s first covered bond. (Straits Times)

Follow @simonmortlock