Bonuses for mergers and acquisitions and capital markets staff in Hong Kong are expected to fall by at least 50% this year, and some could end up with nothing following a freeze in stock market listings.
Reports said that Morgan Stanley will cut bonuses in Asia Pacific by 50% this year, and it may not be the only one. Headhunters say 50% cuts are likely to be the norm. Recruitment firm Randstad’s 2023 market trends report affirms that “bonuses in investment and equity banks are expected to drop by 50% next year.”
US banks will pay bonuses in time for Chinese New Year, while European banks pay later in March and April. Bonus numbers are not yet confirmed, but with equity capital markets revenues down by 80% in some cases, and M&A also sharply down, expectations are low.
Abimanu Jeyakumar, head of client development for APAC at recruitment firm Phaidon International, says: “Due to the lack of deal flow fees, bonuses are expected to be down 50% and in the worst case scenarios there will be a zero bonus.”
Hong Kong bankers were largely spared the zero bonus or ‘doughnut’ in recent years as banks scrambled to hire people amid an industry-wide shortage of talent. International banks expanded aggressively into China, the biggest market in APAC, but a combination of falling volumes and tough Covid restrictions mean that banks are now back to controlling costs and headcount.
As well as paying lower or no bonuses, Jeyakumar says firms will continue to trim headcount in investment banking, but acknowledges that they will need to balance cuts with the prospect of a rebound in activity in 2023. “Banks will have to find the equilibrium of cutting costs whilst keeping the key staff that either know how to survive and thrive in a downward cycle or who can be there to pick up the deal flow as the market picks up.”
In 2022, banks focused hiring on South East Asia at the expense of Hong Kong and mainland China, which were closed due to Covid restrictions.
But fee pools in South East Asia are still dwarfed by China and bonuses are smaller. Jeyakumar adds: “With China opening up I do believe that midway through the year traditional products like ECM, IPOs and M&A will come back.”
David Rothnie – Read more on efinancialcareers.co.uk