Asian pay surge poised to slow

Singapore: Pay increases for private bankers in Asia will slow this year as waning high-margin transactions and Eur-ope's debt crisis spur cost-cutting across the industry, Falcon Private Bank's chief executive officer said.

"I haven't seen a slowdown in compensation increases so far, but it will slow given the global state of the private banking business," Eduardo Leemann, who runs the Zurich-based firm, said in an interview on Sunday.

"You'll see some slowdown by the end of 2011. In 2012 and 2013, we're unlikely to see the 20 to 30 per cent growth seen in Asian relationship managers' compensation pay."

Falcon and rivals including UBS AG and JPMorgan Chase & Co. are competing to hire bankers and managers in Asia, where wealth outside Japan over the next five years is expected to rise almost twice as fast as the global rate of almost 6 per cent, according to Boston Consulting Group data. While Leemann plans to boost his Asian headcount, industrywide margin pressures will make managing personnel costs a priority, he said.

Before the global financial crisis, costs for private bankers in the Asia-Pacific region, including salaries, were about 57 per cent of the revenue they generated in 2007, according to PricewaterhouseCoopers. This year, cost-to-income ratios are forecast to be 82 per cent in Singapore and Hong Kong, and about 70 per cent in Switzerland, the firm said.

"Our clients have become more conservative since 2009," Leemann said. "The bad news is that they are holding more cash and high-quality bonds now, meaning that the margins are less. The good news is they are much better prepared in the recent financial crisis when compared to the one in 2008."

Bonus packages

Average pretax profit margin of wealth managers increased 4 basis points last year to 23 basis points while growth in assets under management slowed to 7.5 per cent from 12.8 per cent in 2009, according to Boston Consulting's 2011 global wealth report covering private banks and wealth management units of banks in Europe; Asia, excluding Japan; North America and Latin America.

Senior private bankers in Singapore earn between $160,000 and $410,000 a year, while the comparative range in Switzerland is $152,000 to $210,000, according to London-based recruitment firm EMA Partners International.

"It is conceivable that the bigger banks are unlikely to make this bonus package anymore," said Leemann, whose firm manages about $12 billion in assets. "Some of our peers are seeing cost-to-income ratios of at least 90 per cent in Asia."

Growth in Asian wealth in recent years has boosted demand for financial advisory services among the region's wealthy and driven banks to step up their presence in Asia, pushing top salaries in Singapore to almost twice the level of Switzerland, the world's biggest offshore wealth manager, according to EMA.

UBS, Switzerland's largest bank, is expanding regional headcount by more than 30 per cent to 1,200 people, Kathryn Shih, regional head of wealth management, has said. JPMorgan intends to add 100 workers to the 140 it had in Asia last year, Andrew Cohen, CEO of its wealth management has said.