Hong Kong stockbrokers' bonuses shrink after 2021 market rout, while staff at banks including HSBC and Bank of East Asia reap the rewards

Thousands of Hong Kong stockbrokers are bracing themselves for slimmed down or nonexistent bonuses to kick-start the Year of the Tiger, after a months-long market rout that savaged their firms’ profits.

Many of the city’s 600 brokerages will be offering much smaller bonuses this year, and in some cases none at all, according to an industry body.

In contrast, staff at the city’s biggest banks including HSBC and Bank of China (Hong Kong) are likely to be celebrating higher bonuses. Bankers said the sector has benefited from the more diversified income they enjoy compared to brokers.

“Many brokers have decided not to pay any bonuses and to freeze salaries of staff this year as it is a tough time for the industry,” said Tom Chan Pak-lam, chairman of Hong Kong Institute of Securities Dealers.

Local firms usually pay bonuses and announce salary increases before or around the time of Lunar New Year, which will fall on February 1 this year.

Hong Kong’s brokerages employ some 27,000 staff.

Bright Smart Securities, a mid-tier stockbroker with 300 staff, still plans to offer a bonus for high-performing employees but the amount is likely to be lower than last year.

“We are still aiming to pay a bonus higher than the market average. We heard that many other brokerages have decided not pay any bonuses or they will only pay a bonus equal to one month’s salary. This is lower than 2021 when some firms can pay a bonuses equal to three to four months of salary of the staff,” said Edmond Hui Yik-bun, CEO of Bright Smart.

The benchmark Hang Seng Index fell 14 per cent in 2021, making Hong Kong the worst-performing market out of 92 major indexes tracked by Bloomberg.

The market began to deteriorate after Beijing launched a no-holds-barred regulatory crackdown on the technology sector in the summer. Worse was to follow, as a crippling debt crisis gripped mainland property developers such as China Evergrande Group, Kaisa Group and Fantasia Holdings Group.

Hong Kong Exchanges and Clearing, which operates the local bourse, saw the amount of funds raised from new listings shrink by 17 per cent year on year in 2021, the first decline since 2017. This hit the profits brokers derive from their IPO businesses.

“All these factors have affected the income of brokers, so many of them are not willing to pay a bonus. They want to keep more cash on hand as we never know what will happen to the market this year,” said Chan.

New cross-border trading channels such as the Wealth Management Connect scheme and the southbound leg of the bond connect scheme have only benefited banks, not stockbrokers, he said.

This may explain why Hong Kong’s bank employees are looking forward to a fatter pay cheque at the start of the new year. Staff at HSBC, Bank of China (Hong Kong), DBS and Bank of East Asia among others contacted by the Post all said they expected their bonuses to be about 10 per cent higher than last year. The average amount is likely to be about four to six weeks’ worth of salary, they said.

“BOCHK will continue to pay bonuses to its staff to reward their contributions and efforts during the pandemic [which made] sure the bank operated smoothly,” said a spokeswoman for the lender, which has about 14,000 staff. She said the amount would depend on individual performance.

HSBC Holding, the largest bank in Hong Kong and Europe, booked US$800 million for performance-related pay to its roughly 200,000 global staff during the first nine months of 2021, according to its third quarter results announcement.

The bank books its bonus payments every quarter, but will pay on an annual basis after it announces its results on February 22. HSBC and its subsidiary Hang Seng Bank are the biggest employers in the sector, with a combined 30,000 staff.

The higher bonus payment, together with an increase in technology investment, led to a 2 per cent rise in operating expenses for HSBC for the nine-month period under review.

“We recognise employees and provide competitive remuneration outcomes based on business and personal performance,” said a spokeswoman for the lender.