Wall Street investment banks are struggling to hire local talent in China

Topics Wall Street | China banks

UBS headquarters in Zurich. | Photo: Reuters
In the US, Wall Street’s biggest investment banks have been known to reject about 95 per cent of job applicants. In China, it’s often the other way around.


Although international securities firms are stepping up efforts to expand in Asia’s largest economy, experienced local recruits tend to prefer state-backed companies such as China International Capital and Citic Securities Co. Even the promise of higher salaries doesn’t always work because local rivals offer the prospect of big one-time commissions.


The talent crunch complicates efforts by overseas banks to take advantage of China’s financial opening, which has continued apace amid the country’s trade war with America. It’s another hurdle for international firms already facing stiff competition from domestic players as they battle for a slice of the $44 trillion industry. “Many candidates have limited interest in joining what they view as third-tier institutions in China,” said Christian Brun, CEO of search firm Wellesley Partners, who has hired bankers in Asia for two decades.


Foreign firms have a limited pool to hire from because they require language capabilities and an understanding of international compliance standards, Brun said. And the reticence of bankers from the top Chinese institutions to join them only adds to those pressures.


Brun and his team have tried to interview more than 120 candidates for positions at foreign banks in China since October. Less than a fifth were willing to even talk, he said, while those who did were often not the top-rated talent. That’s a marked difference from the US or UK, where jobs at big name international banks, including Goldman Sachs Group Inc., UBS Group AG and Morgan Stanley, are among the most sought after by financial professionals.


Foreign banks are still hiring and expanding in China, but the limited options are forcing them to make piecemeal hires by doing some recruiting locally, hiring on campus, growing talent internally or even relocating staff from other Greater China teams. UBS has moved 54 employees to China from Hong Kong since 2016, including 20 investment bankers, a person familiar with the matter said. HSBC Holdings said headcount at its local securities joint venture, HSBC Qianhai Securities, has grown to over 170 in its Shenzhen, Beijing and Shanghai locations since it was set up in December 2017 with a team of 100. Morgan Stanley, Goldman Sachs, JPMorgan Chase & Co., UBS and Credit Suisse Group AG didn’t comment.


One second-year associate at a Chinese brokerage was approached by a global investment banking firm for an opening in Beijing in the middle of 2018, according to the headhunter who handled the case and asked not to be identified because the matter was private.


After an interview and screening process that lasted six months, the candidate lost interest even though the new position would have raised his pretax compensation by 30 per cent. It was almost bonus time at his own firm and he felt it would be easier to get deals done in a local outfit. The profits of foreign banks are still dwarfed by the largest Chinese firms. UBS China reported a loss of 66 million yuan ($9.6 million) last year, while Citigroup China had a profit of 2.6 billion yuan. The biggest Chinese brokerage, Citic Securities, meanwhile generated profit of 9.4 billion yuan in 2018. In recent weeks, the vulnerabilities of the international banks have been on particularly sharp display as UBS found itself fending off a backlash in China — including a lost bond deal — over a quip by its chief economist relating to pork prices.


Eric Zhu, a Shanghai-based manager at global recruiter Morgan McKinley, said he’s concerned about whether the joint ventures can make money because the cost of running a China business is high. The international firms are often willing to given potential hires increases of about 30 per cent, Zhu said. “There’s a big question mark over the sustainability of their China investment.”


The hiring challenges extend beyond investment banking. Jason Tan, director at recruitment agency Kelly Services in Shanghai, pointed to a China-based wealth management banker, who had worked at CICC for more than 10 years and received an offer from a foreign bank late last year.


Although the offer came with a 60 per cent rise in basic salary, Tan said the banker didn’t take it because she wasn’t sure if her total compensation would be higher than the 2 million yuan she made annually at CICC after her bonus as an executive director. While foreign banks may offer higher salaries, local firms, which normally have a bigger pool of product offerings, can sometimes allow bankers to earn more by sharing one-time commissions from other departments via so-called cross-selling.


For instance, a private banker might be entitled to share a commission by introducing a client to a colleague for an initial public offering subscription.


“Compared to foreign firms, local firms can offer a resourceful platform with more room for maneuvering,” said Viviana Wu, a senior partner at executive search firm CGL Consulting, who has two decades of recruiting experience in the region. “Incentives are flexible, working environment is dynamic, decision making channels are relatively effective, and there are more paths for career development.”


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