From the monthly archives:

December 2011

The average base pay for investment banking jobs in Hong Kong has shot up by 15 percent in the past year, and has outpaced salary hikes in London’s financial center.

Analysts in Hong Kong have seen pay increases in the range of 20 percent, while managing director-level staff have seen 25 percent average raises, according to a story from Britain’s Telegraph. Average base pay for investment bankers now hovers around HK$890,000 (US$ 114,428). Whereas similar staff in London saw pay increases in the neighborhood of 12 percent. All this is pretty remarkable given the uncertainty in markets, belt-tightening among banks, and the ongoing hangover from the European debt crisis.

“Investment banking teams operating in Hong Kong have performed more strongly than their counterparts in London and New York in 2011. Generally banks are keener to invest in their teams in Asia than in Europe and the US and that has meant a bigger boost for Hong Kong bankers’ base pay,” said Mark O’Reilly, managing director of the recruitment firm Astbury Marsden which conducted the research.

But insiders expect things to cool down next year as the Eurozone crisis puts more of a damper on growth, and conditions force larger global banks to be more cautious about hiring and salaries, including their Asian offices.

In fact, O’Reilly commented that many of these pay raises were agreed upon early in 2011, when confidence in the banking sector was stronger and banks were eager to retain key staff in order to be well-positioned for a possible recovery. Now, with less of a recovery in sight, pay raises are fewer and more modest.

Some banks, such as HSBC, are even paring back their Asian units. Research from another recruitment firm, Morgan McKinley, shows that 35 per cent of financial services firms plan to reduce their headcount within the next six to 12 months.

One bright spot on the horizon is staffing for compliance. As Hong Kong has expanded its range of financial products, it has triggered a greater demand for compliance professionals. Staff working on compliance teams reported an average 21 percent increase in salaries over the past year, nearly double that reported in London.

Does the growth in Asian investment banking jobs present an opportunity for you? Is it something you’d pursue? Add your comments below.

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The UK is proposing legislation that will force banks to separate their investment banking and consumer banking business. The move is part of complying with the findings of an independent commission on banking led by John Vickers, a former Bank of England Chief Economist.

Back in September, Vickers suggested that banks should create fire walls between their consumer and investment banking divisions, and boost the amount of equity or capital they hold to between 17 to 20 percent, to better withstand shocks to the system. It was in response to the 850 billion pounds (US $1.3 trillion) that the British government has had to spend, pledge and loan to big UK banks since the financial crisis took hold in 2007.

The announcement comes a week after British Prime Minister David Cameron opted out of a European accord to stem the Eurozone’s debt crisis, reports Bloomberg. Cameron’s position was joining the pact would stifle the UK’s ability to support its own financial industry. The Vickers proposals are Britain’s own attempts at preventing another financial crisis and shielding taxpayers from having to shell out for massive bailouts.

“We cannot risk having a repetition of that financial catastrophe that we had three years ago,” said British business secretary Vince Cable. “We can’t have a position where the banks are too big to fail.”

The move sounds similar to the Glass-Steagall legislation passed by Congress in 1933 that prohibited commercial banks from collaborating with full-service brokerage firms or participating in investment banking activities. Glass-Steagall was repealed in 1999. As a result, the distinction between commercial banks, investment banks, and brokerage firms has blurred. Many banks own brokerage firms and provide investment services, according to Investopedia.

Which leads to the question: do you think the UK developments will put further pressure on Congress to pursue similar regulations, or reinstating Glass-Steagall? And what effect would that have on the health of the investing banking industry and investment banking jobs? Add your comments below.

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Adam Janikowski left his job as a vice-president of investment banking at BMO Capital Markets in Britain to pursue an MBA at INSEAD in France. However, INSEAD offers a ten-month MBA, rather than the traditional two-year stint offered by other schools such as Harvard and Wharton. So would pursuing a summer internship still be desirable, or necessary, with the shorter program?

For those pursuing a traditional MBA, the summer internship gives you a chance to “test the waters” at an investment bank, to make sure you are choosing the right career path. It also dramatically improves your chances of landing a full-time position with the same firm after you graduate.

INSEAD’s program runs from January to December and gives students a full two months off for the summer. Students can choose to use the time for a summer internship, or to travel, volunteer, or just relax at home with their families. INSEAD doesn’t require students to do anything in particular at this time.

However, according to Janikowski, who offers his perspective on the program in an article for the Globe and Mail, 56 percent of his classmates found an internship and spent their summers working. This compares to 100 percent of MBA students who participated in summer internships at Harvard.

One interesting side note on INSEAD: of the students who did spend their summers working, the vast majority of them did NOT go to work for their summer employer. In fact, 95 percent decided to try something new!

However, the reverse is also true. INSEAD Career Services advises students who are interested in moving into an investment banking job, particularly in a bulge bracket firm such as Goldman Sachs, that a summer internship is crucial. Many bulge bracket firms will only make full-time employment offers following an internship program.

“Participating in an internship gives you the opportunity to experience a career change without actually having to make a commitment. Almost all of my fellow students who worked over the break felt that the experience will be useful in their future career. An internship is also a good opportunity to earn some money at a time in one’s life when there is only cash outflow,” writes Janikowski.

Did you do a summer internship during your MBA program? Did you receive a job offer as a result? Add your comments below.

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Bonuses Ease Back for Investment Banking Jobs

December 5, 2011

Insiders on Wall Street from CEOs down to investment banking analysts expect to see a dip in compensation this year versus last, reports the LA Times. Although the release of bonuses are still a few weeks away, many are predicting that 2011 compensation levels at the largest investment banks will fall between 15% to 30%. […]

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