A slowdown in dealmaking in Asia partly due to the US-China trade war has hit the bonuses of some of the region’s top investment bankers.
At Swiss lender UBS, investment bankers’ bonus pool for 2019 shrank around 14 per cent compared with the previous year, people familiar with the matter said. The overall bonus pool for the global banking unit, which also includes equities and currency trading, fell around 10 per cent.
Morgan Stanley, which last week reported a 46 per cent year-on-year rise in quarterly profits, cut its 2019 investment banking bonus pool by about 9 per cent in Asia, people close to the bank said. At its results announcement the US lender said it planned to lower its cost-to-income ratio to less than 70 per cent versus 73 per cent in 2019, as part of a push for greater efficiency.
Citigroup’s investment bank bonus pool for 2019 was cut by 6 per cent while Goldman Sachs’ bonuses for the investment banking division were little changed, according to people familiar with the situation.
UBS, Citi, Morgan Stanley and Goldman Sachs declined to comment.
One Hong Kong-based banker said 2019 had been “a tough year, the markets are down because of the US-China trade war”. The bulk of investment banking fees in Hong Kong came from a single deal — Alibaba’s $12.9bn secondary listing, he added.
Dealmaking in Asia stuttered last year against the backdrop of an economic slowdown in China and the country’s trade tensions with the US. Merger and acquisitions in Asia excluding Japan fell to $693bn last year, according to data compiled by Dealogic, the lowest volume since 2014. The number of deals was the fewest since 2006.
Merger and acquisitions in Asia (excluding Japan) last year, the lowest volume since 2014
Hong Kong maintained its status as the world’s leading fundraising venue in 2019 thanks to Alibaba’s listing in November, edging out New York. China International Capital Corporation and Credit Suisse led the listing, with Citigroup, JPMorgan Chase and Morgan Stanley also involved.
“Most people at the international banks saw the fall in deal volumes and fees last year and knew [bonuses] would be down in the region,” said Rupert Hay, a Hong Kong-based associate director at recruiter Morgan McKinley, which specialises in the financial and professional services sectors.
News of the cuts to bankers’ bonuses in Asia was first reported by Bloomberg.
Some banks were also hit by sanctions which affected revenues last year. In March, Hong Kong’s Securities and Futures Commission suspended UBS’s licence to lead IPOs in the city and fined the bank $48m for failing to conduct adequate due diligence on a number of companies. The ban was lifted in January, two months ahead of schedule.
Foreign banks in Hong Kong are also facing growing competition from Chinese rivals, such as Citic, CICC and Haitong.
Chinese securities houses in the past five years have been looking to gain market share just as the international banks have focused more on boosting shareholder returns and complying with regulations, Mr Hay said.
“It is very challenging for western banks in this environment having different objectives and outcomes to the Chinese banks,” he added.