It’s not been the best start to 2016 for bankers in Hong Kong. Bonuses have been generally poor and now global banks are quietly set to trim more of their underperforming front-office staff.
In a typical year roughly 4% of Hong Kong bankers and traders lose their jobs because they haven’t performed up to scratch over the previous 12 months. But in 2016 this percentage is likely to about double, say headhunters who are speaking to an increasing number of bankers who have been cut or fear they might be soon.
This is all in addition to the much larger-scale layoffs that Barclays, Deutsche Bank and Standard Chartered have already announced in Asia.
Unsurprisingly, Hong Kong will be affected by Goldman Sachs’ decision to axe about 10% of its fixed income staff globally in March, instead of the usual 5%.
But in Hong Kong most other banks are following Goldman’s lead and upping their underperformance cutting. Bank of America Merrill Lynch, J.P. Morgan and BNP Paribas, for example, are just three of several firms set to make larger-than-normal culls in coming weeks and months, according to two Hong Kong headhunters, who both asked not to be named. The banks have not yet responded to requests for comment.
“Compared to last year, trimming of underachievers is up – tolerance of mediocrity is very low in today’s market,” says Farida Charania, the Asia Pacific CEO of search firm Nastrac Group, and an ex-Barclays strategist.
“The job market in general is shrinking in Hong Kong and most banks are quietly looking for ways to operate with fewer people,” adds Matt Hoyle owner of Hong Kong headhunters Matthew Hoyle Financial Markets. “There is definitely more trimming this year and it’s higher than in Western markets because Asia is generally not viewed as a core business.”
Banks in Hong Kong kept their annual underperformance trimming to a minimum in early 2015 and then suffered from being overstaffed as mainland markets soured. “Twelve months ago there was still significant confidence in Asia. But with the continued slowdown in Chinese growth, confidence is waning – so when banks look to cut costs, where better to look than in markets they have less optimism in,” says Nick Wells, a director at search firm Webber Chase.
“Equities jobs in particular are taking a big hit at banks in Hong Kong and that’s likely to continue. BAML is announcing cuts, and equities – particularly high-touch – is in the firing line,” says one of the anonymous recruiters.
“Brokers and sales traders who are being replaced by the electronic trading functions are top of the underperformance cull lists at banks. We’ll also see cuts to exotic derivatives trading teams and the quant analytics teams supporting them,” says Wells from Webber Chase.
Hoyle adds: “Across all banks and front-office functions I believe mid-career staff are most at risk, along with very senior people who are perceived as being just too expensive,” says Hoyle.
Because the majority of firms are excising a higher percentage of their bottom achievers this year, these bankers may struggle to find work elsewhere.
“Chinese banks are hiring still but that doesn’t help non-Mandarin speakers much,” says ex-Jefferies trader Warwick Pearmund, now a senior consultant at search firm at Bo Le Associates in Hong Kong. “Everyone else seems to think they’ll get jobs on the buy-side or in fintech – but the former is hardly a hotbed of vacancies and the latter usually requires some knowledge of payments etc. On the whole now is not the time to be an underperformer out of a job,” he adds.
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