By Selena Li and Julie Zhu
HONG KONG/SHANGHAI (Reuters) – China International Capital Corp (CICC) is cutting the base pay of onshore investment bankers by as much as 25%, three sources said, in a major effort to cut costs amid volatile markets and budget cuts in Beijing.
Some of the affected dealmakers were informed of the cuts on Friday, said the sources, who are aware of the pay cuts but declined to be named because they are not authorized to speak to the media.
The cuts will take effect immediately, two sources said. CICC did not immediately respond to Reuters’ request for comment on Sunday.
The salary cuts will affect more than 2,000 bankers, and come after one of China’s largest investment banks by headcount cut bankers’ bonuses by up to 40% last year, as Reuters reported in April last year.
The largest investment bank’s rare move to cut base wages by as much as a quarter underlines the challenges facing Chinese financial companies amid a slowing economy and sluggish IPOs in key 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. Last year, rival CITIC Securities cut wages in its investment banking division by as much as 15%, Reuters reported in June, citing sources.
Money raised through initial public offerings by Chinese companies, from both onshore and offshore exchanges, fell 80% to $2.9 billion in the first quarter from a year earlier, according to LSEG data.
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Chinese financial companies have also made cuts in recent years, cutting salaries and bonuses and asking staff not to wear expensive clothes and watches at work, as Beijing pushes to close the wealth gap.
As Beijing continued its pursuit of “common prosperity,” China’s top watchdog last year vowed to eliminate the 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 ostentatious lifestyles have often come under criticism from the public on social media as the economy slowed.
The bank is also considering 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 any bonuses for 2023, according to two of the three sources, who said bankers at the company received bonus announcements from early April last year.
Funds raised through IPOs by CICC on the mainland fell 31% to 359 billion yuan ($49.5 billion) in 2023 from 2022, while Hong Kong IPO proceeds fell 56% to $5.9 billion, according to data from the bank’s annual report published in March.
Profit attributable to shareholders of the Beijing-based brokerage fell 19% in 2023 to 6.2 billion yuan from 2022, after a 29% decline in 2022 from a record high of 10.8 billion in 2021, the report shows.
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($1 = 7.2464 yuan)
