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Bank pay: The top cut is the deepest

Amid shrinking profits, senior executives at local banks are taking the largest pay cuts, with remunerations dropping by more than 20%

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Bank pay isn't what it used to be as profitability shrink and cost comes under intense scrutiny. Bonuses were slashed for the seniors at local banks last year, while it wasn't exactly lavish among the junior ranks.

Singapore

BANK pay isn't what it used to be as profitability shrink and cost comes under intense scrutiny. Bonuses were slashed for the seniors at local banks last year, while it wasn't exactly lavish among the junior ranks.

At last month's shareholders meeting of DBS Group Holdings and OCBC Bank, it was disclosed that the top honchos took responsibility for higher bad loans in 2016 by getting lower bonuses.

DBS cut senior executive pay by 13 per cent last year to hold managers accountable for weaknesses in areas including surging non-performing loans (NPL), said chief executive officer Piyush Gupta.

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Remuneration for the bank's 19 most senior managers, including Mr Gupta, fell to S$58.2 million in 2016, DBS's annual report shows. Mr Gupta's total pay fell 23 per cent to S$8.44 million - a bigger cut than his counterparts at two other local banks.

OCBC chairman Ooi Sang Kuang said the bank is slowing down the fixed pay increments for its senior staff, while bonuses for senior management fell last year - in some cases "very significantly" - reflecting accountability for higher bad loans.

Mr Ooi volunteered a 26 per cent pay cut for 2016 as his fees fell by S$400,000 to S$1.4 million from S$1.8 million. OCBC chief executive Samuel Tsien took a 20 per cent pay cut to S$8.3 million from S$10.5 million in 2015.

One banker said that in a lousy year, seniors would take the largest cuts in bonuses, while a smaller bonus pool would have some impact across the staff.

"Economy was weak, trade flows were lower, more NPLs, so increments were lower, bonus was lower," the banker said.

"Reflecting our belief that accountability starts from the top, the bonus cuts were not only deepest at group management committee level, they were also socialised across all 19 members," a DBS spokesman told The Business Times.

"For the rest of the organisation, in line with our practice of paying for performance, bonus payouts varied according to unit and individual performance."

Consultants said bonuses for the banking industry and increments have been zero to not much, reflecting the pressure to rein in costs.

"Depending on the organisations and, in certain cases, the functions, increments were in the range of 0-7 per cent on an average," said Nilay Khandelwal, regional director of Michael Page Singapore.

Functions that had better increment than others were corporate banking, corporate governance (risk, audit and compliance), analytics and digital, he added.

"Bonuses ranged from 0-12 per cent on average. Compared to 2015, it was on a lower level."

And for those looking to move given that bonus season is over, they shouldn't hold out for much higher pay. Mr Khandelwal said that for candidates changing jobs at senior level, they are moving for 0-10 per cent increase in salary.

But at Citi, where performance has been consistent in recent years, bonuses remained healthy.

Jorge Osorio, Citi Singapore's head of human resource, said: "As with most organisations, bonus pools are determined by business performance, and Citi has maintained consistently strong results as a franchise in the past couple of years.

"As for 2016, bonus pools in Singapore were generally consistent with prior years across the franchise."

For new senior hires, Citi generally compensates between the 50th and 75th percentiles of the industry, he added.

For young people, banking remains an attractive career, and thousands of fresh graduates continue to vie for jobs during recruitment season, usually earlier in the year.

Banking may no longer offer the best starting pay - pharmaceutical is said to be highest - but graduates of accounting and business studies still make a beeline for banks, "hoping they can earn more later", said an insider.

DBS Bank last year received up to 5,000 fresh graduate applicants and hired about 450.

Citi received close to 5,000 applications from fresh graduates this year for its graduate programmes. It usually takes in 200 fresh graduates a year.

"To ensure that we continue to pay competitively to attract talent, starting pay for fresh grads or other new hires has not been impacted," said the DBS spokesman.

"Our fresh graduate starting salary has been kept at the same level since 2014 - no increase or decrease - and this same level will apply to the 2017 intake as well," said a OCBC spokesman.

BT understands that fresh graduates who make it into the OCBC Young Bankers' programme, which trains a select group for leadership roles, are paid a premium.

One source said the industry's monthly pay for fresh graduates ranges from S$2,900 to S$3,600. But in more sought-after jobs such as IT, compliance or investment banking, they can expect more.

"Entry-level salaries for management associates or structured graduate programmes have always been competitive to the market," said Mr Osorio.

"Citi regularly engages in compensation studies to help us better understand our market positioning so that we provide a comparable starting point for fresh graduate hires."

According to Michael Page, front office or sales roles in private, corporate and investment banking, fresh hires can expect S$5,000 per month onwards. Mid-office is lower at S$4,000 and back office is S$3,500.

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