Asia bonus doom: “This is the biggest year-on-year drop I’ve seen"

US banks are said to be weighing further job cuts to their Asia-Pacific operations, as bankers in the region could see their bonuses fall by a record amount. 

With Morgan Stanley kicking off bonus season and US rivals set to follow over the coming days, overall packages could be down by as much as 30% in APAC, according to bankers who are involved in setting compensation.

“This is the biggest year-on-year drop I’ve seen,” said one senior corporate financier who's worked in the region for more than a decade.

Some managing directors will see their pay fall by 40% overall compared with 2021, while total compensation could be down by as much as 30%.

The steep falls won't come as a surprise to bankers based in Hong Kong and mainland China. Investment banking fees in Hong Kong fell by 64% compared with 2021.

Bankers in other locations across the region may feel aggrieved. “Bankers in Australia have had a decent year, yet the overall pool will still be down,” said one headhunter. Fees across the APAC region dropped by 38%, according to Dealogic.

Banks have been building out their operations across the region to offset the fall in investment banking fees in China and Hong Kong. Investment banking fees in South-East fell by 28%, Dealogic says.

Meanwhile, US firms are said to be considering further job reductions in APAC in the coming weeks.

The China operations of western banks continue to look vulnerable. After years of investments in their onshore operations, many are struggling to make these businesses profitable.

Goldman Sachs, Morgan Stanley, Nomura and Credit Suisse have already made cuts and sources say that US banks could make more cuts once they have announced bonuses.

“The problem for foreign banks with China businesses is that they are back to 2019 in terms of revenues, but they are carrying 25% more headcount,” said one source.

The problem is widespread, as a global slump in deal making and equity capital markets activity is prompting banks to pull back from areas where they don’t have an edge or where they have hired too many bankers.

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