Asia’s leading bankers risk 50% pay cuts

Bankers in Asia ex-Japan at some of Wall Street’s largest firms, including Goldman Sachs, Morgan Stanley, and Bank of America, are facing the worst payouts since the financial crisis more than a decade ago. According to sources, the average total executive compensation at these banks has dropped by 40% to 50%.

The payouts for senior executives have fallen to a range of $800,000 to $1.5 million, while first-year Managing Directors are receiving between $600,000 to $1 million. However, star bankers are facing less severe pay cuts of 20% or less, with some still taking home around $2 million. Non-performers, on the other hand, are experiencing cuts of 60% to 70% and many have been excluded from the bonus pool altogether.

Investment banks are now working to curb costs after expanding in recent years to compete for talent and higher inflation. Job cuts have ramped up in Asia, which has been the largest growth market for years. Goldman Sachs plans to cut 3,200 jobs worldwide, with two rounds of job cuts already being implemented in Asia since September, mainly impacting China-focused bankers. Morgan Stanley has also laid off China-focused bankers.

The pay cuts are due to the impact of the government crackdown in China and the nation’s failed pursuit of Covid Zero, which has had a significant effect on business. The ability of domestic companies to sell shares overseas was also limited, causing a 88% decrease in those deals over the past year. This has led to a 50% decrease in investment banking revenues at the largest lenders globally.

While some banks have attempted to narrow the pay gap among bankers instead of cutting jobs, more rounds of cuts could occur in 2023, according to one of the sources. Managers have been the hardest hit, with a 30% decrease in total compensation to a range of $400,000 to $600,000.

Vice Presidents are at less risk, with a drop of only 10% to 15% from the previous year. However, some teams in countries like Australia and Korea, as well as those in clean energy, mergers, and acquisitions, have been able to fare better. Banks are also retaining high-performing employees in anticipation of a transaction recovery, with Citigroup increasing pay for its junior investment bankers by up to 15%.