As the global economic climate darkens it is no surprise that bonus levels have been slashed. But for a small minority of top relationship managers in Asia, bonuses are juicier than ever.

Bonus season is here, and as the global economic climate darkens it is no surprise that discretionary compensation levels have been slashed. But for a small minority of top relationship managers in Asia, bonuses are juicier than ever.

Headhunters say that for most of the employees of the banks which have already posted bonuses, including Australia and New Zealand Banking Group, Credit Suisse, Deutsche Bank, Standard Chartered, Royal Bank of Scotland, UBS, JP Morgan, HSBC, Julius Baer, bonuses have been lacklustre.

“In general we feel bonuses will be down this year across the private banking industry in Singapore, with rising operating costs across the industry and the diminishing levels of returns on assets,” said Alex Diffey, managing director at recruiter Fox Partnership (Asia). “We feel the relatively high basic salaries will remain in the market but the days of mediocre performers being paid substantial discretionary bonuses are all but over," he added.

“Most people are feeling pretty disappointed,” said one head-hunter working in Singapore who asked to remain anonymous. “There will almost certainly be a lot of people wanting to leave, but the question is whether there are any jobs for them at the moment.” 

Another added: "For large institutions with discretionary payouts the cut-off seems to be around $1 million in revenue. Production below that seems to result in zero bonus or worse..."

The news on the bonus front has been almost unequivocally dismal. Earlier this month Bloomberg reported that Credit Suisse had cut its bonus pool by over 40 per cent to $3.3 billion from $5.5 billion in 2010. Only around half of that will be paid in cash, while the rest will be paid in shares which vest in three years time. 

Other reports show that Deutsche Bank and JP Morgan bonuses were cut by a similar amount, with the cash portion of bonuses shrinking to as little as a quarter. Some managers were taking home three-quarters of their bonus in deferred stock options, according to the Economic Times. 

Meanwhile Credit Suisse’s bigger rival, UBS, slashed bankers' bonuses by as much as 60 per cent, with the highest cuts occurring in the investment banking division, according to sources close to the bank. The Zurich-based lender loaded the blame on the alleged $2.3 billion rogue trading loss which occurred last September in its investment bank.

And UK-lender HSBC is expected to announce today that it will cap its bonuses at £50,000 ($79,000), supposedly as a sign of restraint in an increasingly austere climate.

A Growing Divide

But for the star bankers, headhunters say firms are still willing to hand over discretionary pay rivalling levels known in the boom years. 

“Sign-ons and large guarantees are becoming reserved for only the most critical hires and top quartile talent, as banks are being forced to be more prudent with discretionary bonuses,” said Diffey.

A senior banker at the wealth management division of a large Swiss bank said that this year bonuses have returned to form, i.e. as a way of distinguishing the best performers. "Over the past few years, especially in Asia where banks have been trying to grow, everyone got a bonus whether you were doing well or not. But now banks are only rewarding their truly star bankers and rewarding them well." 

He added that senior compensation levels in the Asia wealth management industry still surpass those in other parts of the world, down to the shortage of talent in the region where most firms want to expand. "There is still a very strong demand to hire the top relationship managers in Asia. Banks know that if they do not reward their best rainmakers adequately, a rival will give them a better offer," he said. 

This supports recent reports from global management consultancy Hay Group, which said last December that Singapore-based bankers' salaries had jumped 7 per cent. Meanwhile a survey last September from recruiter EMA Partners International, showed private bankers in Singapore get paid on average nearly twice as much as their Swiss equivalents. 

Indeed reports suggest that although many banks are declaring slashed bonuses, they will find a way of keeping their prized talent happy. HSBC for example will be able to negotiate the bonus cap by giving its bankers £200,000 in vesting shares and selling them immediately, say UK media reports. Others like Citi, RBS and UBS are skating round the contentious bonus issue by reportedly raising basic salaries, and dropping bonuses. But this is for the exception rather than the rule, and most bankers will be facing dramatically reduced packages this year.

So will a talent flow of disgruntled bankers ensue? Those close to the industry say no - at least not for the average relationship manager. The Singapore-based recruiter pointed out that although bonuses may be depressed, many banks may take the view that competitors' hiring budgets are also downbeat. So even if an employee feels disappointed with a bonus, he will not be faced with many better options, unless he can guarantee a substantial number of clients moving with him to his next role. 

And this is becoming harder. Tired of moving with their relationship manager every time he jumps ship for a better offer, Asia-based clients are becoming more loyal to the banks and less so to their bankers. While in the past a relationship manager in Asia could expect to bring 60 or 70 per cent of his client book with him, this has plummeted to 20 or 30 per cent, recruiters say.