China bank chiefs' already low pay cut in half even as problems mount

Jiang Jianqing, chairman of Industrial and Commercial Bank of China made less than 550,000 yuan (S$115,228) in compensation last year.
Jiang Jianqing, chairman of Industrial and Commercial Bank of China made less than 550,000 yuan (S$115,228) in compensation last year.PHOTO: BLOOMBERG

BEIJING (REUTERS) - For the bosses of China's state-owned banks, running some of the world's biggest financial institutions just got a lot less appealing last year, as the government slashed their compensation in half as part of a wider austerity drive.

The top executives' pay was already very modest by Western standards. But now they are earning less than many first-year bankers in the United States and Europe, while the disparity with Western bank CEOs is enormous and widening.

For example, Jiang Jianqing, chairman of Industrial and Commercial Bank of China (ICBC), the world's biggest lender by assets, made less than 550,000 yuan (S$115,228) in compensation last year.

That was down 52 per cent from 1.1 million yuan in 2014, according to the bank's latest annual report.

His compensation was just 0.3 per cent of the US$27 million (S$36.62 million) received by JPMorgan Chase & Co Chief Executive Jamie Dimon in 2015. It was also a fraction of the 14.3 million Swiss francs (S$20.26 million) that UBS Chief Executive Sergio Ermotti received in compensation for 2015.

The biggest Chinese banks are typically led by bureaucrats appointed by the central government and for many, the top jobs are often the passport to powerful political positions in the future. But their pay is capped - and has now been savagely cut.

The disparity in salaries of Western and Chinese bank executives has got bigger ever since the big Chinese banks first broke into the top league of global rankings after the financial crisis. Today, China's top four banks are among the world's top 10 banks by assets.

The pay cuts at China's top banks come at a particularly challenging time as lenders battle with bad debts that have risen to a decade high. The banks are also struggling to grow their business due to a slowing economy.

In the past, executives at China's state-owned enterprises (SOEs) often had opportunities to get additional payments and perks to make up for the low salaries. But President Xi Jinping's sweeping anti-graft campaign has turned the spot on government officials, further curbing their ability to get any such extra income.

SOE REFORMS

Beijing is aiming to transform executive compensation at its biggest state firms by cutting salaries, curbing misuse of non-salary benefits and holding managers responsible for the performance of their firms, as part of SOE reforms.

Under the plan, which is being implemented from 2015, top bosses at 72 central government-owned firms, which also includes major companies such as PetroChina Co, China Petroleum & Chemical Corp (Sinopec) and China Mobile face pay cuts of as much as 50 per cent. The figures just released show that when it comes to the banks, Beijing imposed the full penalty.

As salaries at top US banks have recovered after the collapses and bailouts of the 2008-2009 financial crisis, China bank executives have seen their compensation heading in the opposite direction.

Salaries for the chairmen and presidents of China's five biggest banks all dropped 50 per cent in 2015, the lenders' just released annual reports show.

The hefty pay cuts for its top bankers came as China's weak economy pressured the lenders' profits. China's big banks last month reported their weakest profit growth in a decade.

China Construction Bank , the country's second-biggest lender, slashed chairman Wang Hongzhang's annual compensation to less than 600,000 yuan in 2015 from 1.2 million yuan in 2014.

The chairmen at another three major Chinese state lenders - Agricultural Bank of China , Bank of China and Bank of Communications - also only pocketed half of what they earned in 2014, their annual reports showed.

Besides the chairmen of the lenders, their presidents also saw their compensation halve in 2015, the reports showed.