Will bonuses be pegged to (sub-prime) performance?

Singapore bankers upbeat about fatter bonuses
Business Times Singapore, 8 December 2007
By Chow Penn Nee
(c) 2007 Singapore Press Holdings Limited

(SINGAPORE) Despite market volatility stemming from the sub-prime crisis in the United States, Singapore-based bankers are counting on higher bonuses this year, and are optimistic about next year as well.

So says a worldwide survey of 20,270 employees working in financial services, conducted by eFinancialCareers.com, a global financial careers website.

The study found that slightly over half of Singapore bankers expect to receive higher bonuses than last year, and only about 17 per cent expect their bonuses to be lower than the bumper payouts of 2006.

Sarah Butcher, editor of eFinancialCareers.com, said: 'The expectation of swelling bonuses may be linked to the fact that Singapore-based bankers are paid less than their global counterparts. She added that the survey revealed that the average Singapore banker received a bonus equivalent to 44 per cent of salary last year, compared with 76 per cent in Hong Kong and 58 per cent in the US.

Hong Kong bankers share similar optimism about bonuses, with also slightly more than half of them expecting to receive higher bonuses than last year, and only 14 per cent anticipating lower bonuses.

In contrast, 60 per cent of UK bankers believe bonus levels will be down next year.

Globally, the survey showed that equity capital markets and M&A bankers are the most optimistic when it comes to predicting this year's bonuses. A BT report said investment banks in Singapore earned over 45 per cent more in the year to date than in the corresponding period last year, driven by growth in fees in mergers and acquisitions, equity capital markets and debt capital markets. Due to sub-prime woes, debt capital markets and credit-focused bankers are the most pessimistic, said the survey.

Bonuses are not the only thing Singapore bankers are upbeat about, as 42 per cent expect business to improve in the coming year. Bankers from China and Hong Kong are similarly upbeat, with 56 per cent and 41 per cent respectively, forecasting a better 2008.

By comparison, about 40 per cent of UK bankers expect business to worsen next year, while about one-third of US, French and German bankers also predict that conditions will deteriorate.

Ms Butcher explained: 'The notable optimism of finance employees in Asia is no surprise as the growth of industries amid China's economic boom has led to increased business activity and a climate of promise throughout the entire region.'

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Asia Big Bonus Swindle

eFinancialCareer.hk, 3 December 2007

Asian bankers account for a growing proportion of bank's profit. But they are still short-changed at bonus time.

This year, the situation looks set to be worse than ever. Most US banks have lost packets through the US sub-prime crisis, meaning profitable local bankers are in danger of subsidising their struggling American colleagues.

Gary Lai, manager of front-office banking at recruiter Robert Walters Singapore, says Hong Kong and Singapore bankers employed at US and European houses are already prepared for the fact that their bonuses will be negatively affected as a result of the sub-prime fallout.

But is the situation really this dire? A recent study by international search firm Options Group found Asian bonuses are likely to rise by up to 5% this year. By comparison, payouts in the US and Europe are predicted to fall 10-15% and 5-10% respectively.

There are rumours that Asian bonus pools have been ring-fenced and won’t be reallocated to subsidise struggling divisions elsewhere. Nader Farahati, director at consultancy Oliver Wyman, told Financial News recently that Asian bonuses will not be reallocated.

John Jessen, the Singapore-based group CEO of headhunter Smith & Jessen, also doubts that Asian bankers will have to subsidise colleagues in the US and Europe.

Jessen says banks want to protect assets where they make the most money: “Asia is in such a build-out mode that no one wants to let their competition leave them behind.” He expects most hiring investments to flow eastwards in 2008, with trading floors in India set to double or even quadruple in size over the next two to three years.

The sentiments of bankers in other emerging Asian economies such as Indonesia, Thailand and Malaysia also remain positive, says Lai: “The general consensus seems to suggest that their bonuses will be healthier than previous years, as many of these economies started off from a low base and are experiencing strong domestic growth.”