Chinese investment banks in HK threaten bonuses cuts despite record revenues

Investment bankers at global firms in Hong Kong have been lured across to Chinese banks on false promises. Headhunters say Chinese investment banks raised bonuses expectations in order to poach more people from Western firms over the past year, but they are now reneging on these despite a strong first half for fees.

Most of the recent movement has been to large firms such as Bank of China, Bank of Communications, China Construction Bank, China International Capital Corp, China International Trust and Investment Corporation, and Industrial and Commercial Bank of China, say headhunters. “Chinese banks have been on a strong growth trajectory, especially so recently. With various rounds of restructuring at global banks, Chinese banks have been quick to snap up talent,” says Jason Ne Win, principal recruitment consultant at recruiters Selby Jennings in Hong Kong.

Still, Chinese banks have had to work hard to convince these candidates to join them. While most new recruits didn’t receive guaranteed bonuses, many were told to expect above-market payments, says Matthew Hoyle, chairman of search firm Matthew Hoyle Financial Markets in Hong Kong.

“Some bankers moved because they perceived Chinese banks had more capacity and deeper pockets when it came to bonus payments. There have been cases of Chinese banks recently overpromising on bonuses,” adds John Mullally, director of financial services at recruiters Robert Walters in Hong Kong.

Not only were new hires to Chinese banks generally disappointed with their 2014 bonuses, some are already being told not to expect bumper payments for this year, says Hoyle. “The guys I speak with who’ve gone from US and European banks to Chinese banks over the past 12 months are now being advised to expect low bonuses – even the strong performers. That’s a big turn-around from when they joined,” says Moncef Heddad, a former investment banker at J.P. Morgan in Hong Kong who now runs boutique advisory firm MCM Partners.

Holding back the cash

Bankers who’ve made the move are especially annoyed that the downbeat message on bonuses comes after Chinese investment banks enjoyed a record first half for fees in their domestic market. “Chinese banks may be worried about the second half because of the mainland stock rout, but their new bankers still aren’t happy about low bonuses being mentioned so early on in the year,” says Heddad.

“Some Chinese banks in Hong Kong have updated their employees that they’re holding back bonuses for overall cash-flow reasons or they’re just being conservative because of current market conditions,” adds Eunice Ng, director of search firm Avanza Consulting in Hong Kong. “It looks like some bonuses will be shrunk substantially and won’t match what was estimated when people recently joined. Employees who’ve moved from Western banks are therefore upset, disappointed and demotivated,” she says.

And what of the minority of bankers who joined Chinese bank with guaranteed bonuses? “I’m not aware of Chinese firms reneging on guarantees but I am on aware of people going in on big one-year guarantees and then getting crushed when they come off them,” says Christian Brun, managing partner at search firm Wellesley Partners in Hong Kong.

Point of no return

Disgruntled new recruits at Chinese firms may unfortunately find Western banks reluctant to take them back right now. “The foreign firms will know that you moved away a year ago because of money and they’ll also know that you want to return so soon after because you’re now disappointed with your money – it’s hard to get a job if you’re seen as so blatantly money-motivated,” explains Heddad.

“Western banks in Hong Kong are still looking to hire people with good China experience, so long term there’s no issue with rejoining a Western bank,” says Mullally from Robert Walters. “But short term what should be of concern is whether you’ll now look like a job hopper with only 12 to 18 months spent in one firm.”