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The good times are over for Hong Kong's bankers as their bonuses are crushed by protests, trade war

Enoch Yiuenoch.yiu@scmp.com

The good times are over. Hong Kong's bankers and stockbrokers are expecting to receive their smallest bonuses and pay rises in 10 years after social unrest and the US-China trade war hit market turnover and led the city into recession.

Local firms usually pay bonuses and announce salary increases before or around the time of the Lunar New Year, which will fall on January 25 when the Year of the Rat gets under way.

The expectations are not high for the financial sector's 237,405 employees in Hong Kong.

The 600 stockbrokers, many of them small local firms, are expected to take a particularly hard hit.

"The pay rise and bonus in early 2020 is going to be the worst in a decade," said Gordon Tsui Luen-on, chairman of the Hong Kong Securities Association.

Many brokerage firms froze salaries and reduced bonuses in early 2009 after the global financial crisis hit the local economy, and the Hang Seng Index plunged. Tsui believes the same will happen in 2020 with some brokerage firms even cutting salaries or laying people off.

The trade war and the protests have dampened market sentiment, while stock market turnover fell 20 per cent in the first 11 months of the year, slashing the commission income of local brokers.

"The brokers suffered comparatively lower turnover this year. They have no favourable conditions to offer salary increase or bonus," Tsui said.

Protests force Hong Kong's small stock brokers out of business

Bright Smart Securities, a mid-tier stockbroker with 300 staff, still plans to offer a small bonus for high-performing staff but admitted the level would be lower than last year.

"The brokerage industry is having the worst time in a decade. The management has to prepare for the worst in 2020 as the protests show no signs of ending," said Edmond Hui, chief executive of Bright Smart.

Things are not looking much better for Hong Kong's bank employees.

HSBC, the biggest bank in the city, and its subsidiary Hang Seng Bank, will give no pay rises to their top three grades of senior staff " chief executives and department heads " while the rest of the staff could get an increase of between 1 and 2 per cent, according to several employees at the two banks contacted by the Post. They are the biggest employers in the sector with a combined 31,000 staff.

"We won't comment on market rumour. Our reward decisions are based on employee performance and behaviour, taking into account local market considerations," said a spokeswoman for the Hong Kong office of HSBC. A Hang Seng Bank spokeswoman said the pay review and bonus would depend on the bank's results and individual performance.

The sources said neither bank has yet decided about the bonus levels. Last year, some junior staff who performed well may have got a bonus of two or three months' salary.

HSBC and Hang Seng will announce pay rises and bonuses on the same day as their results on February 18.

HSBC froze the salaries of senior executives from 2015 to 2017, and raised them modestly in 2018. Other junior staff had a pay rise of about 2 to 4 per cent in recent years.

The tightening of pay rises in 2020 came after the London-headquartered HSBC in August announced plans to eliminate almost 2 per cent of its global workforce and reduce the bank's wage bill by 4 per cent in 2019. The bank globally had 237,685 full-time staff as of the end of June.

Other banks contacted by the Post indicated they were expecting bonuses equal to one or two months' salary and pay increases of up to 3 per cent.

As Hong Kong protests rage, finance chief warns of downgrade for economic growth

"We do not anticipate an increase in the average bonus amount on offer from banks compared to last year, the forecast is an average bonus of around one to three months in general," said Elaine Lam, managing director at international recruitment consulting firm Robert Half Hong Kong.

"Wage growth globally has tracked at around 4 per cent in recent years and this is not expected to change significantly in the coming year based on projections across the overseas markets we operate in. In turn, we are expecting pay rises at around 2 to 5 per cent in the Hong Kong financial sector over the coming year."

The best bonus year for Hong Kong's brokerage industry was 2018 when some firms rewarded top-performing traders with 20 to 30 months' salary. The Hang Seng Index rose 36 per cent in that year while the average daily turnover in some months stood at HK$200 billion, three times the normal level.

"That was a great year but gone are the good old days," Hui said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.