Hong Kong investment banks bemoan “worrying” junior talent shortage

If you’re a junior banker at an investment bank in Hong Kong, consider yourself hot property for the rest of this year.

Banks in the territory are facing a self-inflicted shortfall of associate-level talent at the very time when they need to hire more foot soldiers to help them execute deals.

“Their graduate programmes were cut aggressively post-financial crisis and this has affected the level of associate candidates in the market right now,” says Sarah Harte-Spencer, director, global markets, at search firm Sheffield Haworth. There are also too few analysts ready to move up into associate positions.

The junior talent shortage has been exacerbated in the past six months by juniors moving out of banks and into M&A advisory roles at acquisition-hungry Chinese companies – a trend we first highlighted in February.

“And most of the associates who were spared redundancies a few years back have since been promoted to VP or director,” says Moncef Heddad, CEO of MH Search and Advisory in Hong Kong.

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Suddenly sought after

The lack of associates on the job market in Hong Kong is now particularly “worrying” because demand for their skills is starting to rise, says Heddad. “Management at banks are supporting junior hiring initiatives this year, otherwise their teams will be under immense pressure, with the potential to miss out on deals,” adds Stanley Soh, regional director of Asian financial services at search firm Global Sage in Hong Kong.

Although investment banks suffered their worst first quarter by revenue in Asia since 2009, they are currently “pipelining talent” ahead of an expected increase in deal-flows later this year, according to the 14 banking HR professionals who attended an eFinancialCareers roundtable discussion in Hong Kong earlier this month.

Equity capital markets, especially in Hong Kong and China, remain buoyant, suggesting that more deals are on the horizon for banks in Hong Kong. “Banks are expecting volumes to pick up in Q3 and they will need help from more junior bankers to execute business,” says Heddad.

If and when markets recover, associates will also be asked to fill the gaps created by banks’ recent cost-saving purge of underperforming directors and MDs. “Banks believe that hungry young associates and VPs can pick up the workload at less cost, but they’re not investing enough in training these people,” says Heddad. “They aren’t thinking strategically about future business growth and are just fixing short-term skill shortages.”

No dash for extra cash

Unsurprisingly, associates and analysts on the brink of promotion are often receiving more than one job offer, according to recruiters in Hong Kong. But, says Soh from Global Sage, these bankers are generally seeking a stable platform to build their careers rather than a big immediate pay rise.

Today’s junior bankers have lived through the mass redundancies that shook up Hong Kong’s banking sector in 2011/12 and are cautious about moving to firms with axe-wielding reputations, says Heddad from MH Search.

“And the risk of moving jobs is greater in Asia because only a few banks have their HQ here, and hence their level of commitment is less than at home. Many banks have hired and fired in HK in the recent past, and that has changed the psychology of candidates,” adds Heddad. “A bank’s reputation and company culture are now key to attracting candidates since big pay packages are no longer around.”

Promotion pitfalls

Meeting the career demands of analysts and associates is, however, not without dangers for banks themselves. “We may be now creating a junior talent bubble, promoting people too quickly, and giving them too much responsibility without them actually gaining proper experience,” says Heddad. “It will save the banks money today and make shareholders happy, but it will have a greater cost down the road. Future leaders in three to five years may lack some of the skills that their predecessors had.”