HONG KONG/SHANGHAI – China International Capital Corp (CICC) is cutting the base pay of onshore investment bankers by as much as 25 per cent, three sources said, in a major effort to reduce costs amid volatile markets and Beijing’s austerity drive.
Some of the dealmakers affected were notified on April 26 about the cuts, said the sources, who had knowledge of the pay reductions but declined to be named as they were not authorised to speak to the media.
The cuts were to take immediate effect, two of the sources said.
The salary cuts were to affect more than 2,000 bankers. The move came after one of the largest investment banks in China by headcount trimmed bankers’ bonuses in 2023 by up to 40 per cent, as Reuters reported in April 2023.
The rare move by the top investment bank to reduce base pay by as much as a quarter underscores the challenges Chinese financial firms face amid a slowing economy and sluggish initial public offerings (IPOs) in the main listing destinations in China and Hong Kong.
Investment bankers are typically subject to volatile bonus payments based on performance but drastic reductions in base salary are less common. In 2023, rival Citic Securities lowered pay across its investment banking division by up to 15 per cent, Reuters reported in June, citing sources.
Money raised via IPOs by Chinese companies, from both onshore and offshore bourses, plunged 80 per cent to US$2.9 billion (S$3.95 billion) in the first quarter compared with a year earlier, according to data from the London Stock Exchange Group.
Chinese financial firms have also jumped on an austerity drive in the last couple of years – cutting salaries and bonuses, and asking staff not to wear expensive clothes and watches at work – as Beijing pushes to bridge the wealth gap.
Also, as Beijing pushed ahead with its “common prosperity” drive, China’s top graft-busting watchdog in 2023 vowed to eliminate ideas of a Western-style “financial elite” and rectify the hedonism of the excessive pursuit of “high-end taste”.
Financial professionals are among the highest-paid workers in communist China, and their wealth and flashy lifestyles have often come under criticism from the public on social media as the economy slowed.
The bank is also mulling over job cuts at its offshore investment banking unit in Hong Kong, one of the three sources said. It is unclear how many bankers are permanently based offshore.
The bank has not yet announced bonuses for 2023, according to two of the three sources, who said bankers at the firm in 2023 started receiving bonus intimations from early April.
Funds raised via IPOs by CICC in China dropped 31 per cent to 359 billion yuan (S$69 billion) in 2023 from 2022, while Hong Kong IPO proceeds plunged by 56 per cent to US$5.9 billion, according to data from the bank’s annual report published in March.
Profit attributable to the shareholders of the brokerage fell 19 per cent in 2023 from 2022 to 6.2 billion yuan, following a 29 per cent drop in 2022 from an all-time high of 10.8 billion yuan in 2021, the report showed. REUTERS
