Lackluster performance has finally caught up to investment banking employees in Asia. According to a recent Bloomberg report, compensation for managing directors at major firms has fallen sharply this year in China in particular, down as much as 60 percent. This marks a low water mark for compensation in the region, not seen at any point in the last decade. Much of the decline in compensation has come from smaller bonus pools, as institutions struggle to generate revenue in a difficult economic environment.
North American Investment Bankers Regain the Lead in Compensation
For several years of the last decade, investment banking professionals working on Chinese deals held a compensation advantage. However since 2010, the tide has turned to favor those working in North America. In the past year, those working on Chinese deals earned between $900,000 and $1.3 million US dollars in total compensation, including salary, cash bonuses and stock options. This compared to an average range of $1.2 to $2.0 million for North American investment banking employees.
Analysts suggest that this shift in compensation reflects reality, rather than a fall below reasonable levels. According to Richard Hoon, CEO of a leading Singapore-based executive search firm, over the last decade pay had “went beyond the market, and now they’re back to market reality.”
In the past, those with skills and experience in Asian business practices, especially language capability, were paid a “China premium.” As the number of initial public offerings and merger deals has declined since the financial crisis, there is no longer a shortage of available investment banking professionals willing to use their skills in the region. Accordingly, this China premium has disappeared.
What are the Implications for Investment Banking Job Seekers?
The Asian investment banking market has held out as one of the limited number of bright spots for potential job seekers for the past several years. Continued robust economic growth in many emerging economies in the region created deal flow that simply did not exist in the traditional markets of North America or Europe. Now, as transactions slow in the Far East and regulators increase pressure on the industry at home, investment banks are scaling back their teams.
While the data from China is certainly not encouraging to those seeking out international opportunities in the industry, this data only represents one country in a region with vastly diverse economies. Opportunities continue to be strong in Singapore and Malaysia , and there is certainly the possibility that China could quickly return to growth. Compensation may be slightly lower than in the past, and opportunities may be fewer and far between, but the market does offer some intriguing possibilities for those that want to seek out a unique experience.
Of course, some skills will be critical those seeking opportunities in the area. Knowledge of local languages, especially Mandarin Chinese, is a major advantage, thought not necessary for all jobs. Experience in the region, whether within the financial industry or general business, is also a key attribute. With the right skills and experience, along with an interest in experiencing an entirely different business culture, those interested in an investment banking career still have opportunities in Asia, even if such positions have seen reduced compensation.