China Daily Global Edition (USA)
Quality drive puts brakes on IPOs
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Staff at some securities brokerages in China appear to be in for hard times as their employers are said to have cut salaries as well as human resources, after the business related to initial public offerings or IPOs began to shrink, industry sources said.
A monthly salary slip from an unidentified employee of Shenwan Hongyuan Securities, they said, went viral on the internet recently.
The stock analyst concerned apparently received only 4,783 yuan ($749.4) in monthly salary recently, down as much as 40 percent from the normal level.
Media reports said the brokerage adjusted its staff pay structure in late 2017. Key performance indicators or KPIs, which are linked to real sales, were given a weightage of 20 to 50 percent, it was said.
So, a plunge in the IPO business led to a decline in salaries — or so goes the market buzz.
Shenwan Hongyuan declined to comment for this story. It was not possible to identify its analyst concerned.
From January to May 17, the brokerage reportedly had no IPO-related work projects. In the same period last year, it had seven IPO projects on its books.
Pingan, Southwest and Minsheng Securities also reported nil IPOs in the same period this year. Typically, well-established brokerages employ 200-10,000 staff across different divisions, including 40 to 800 in investment banking, research and analyses.
An analyst working with a major Shanghai-based brokerage, speaking on conditions of anonymity, said, “We feel okay. It’s just … no business or bonus. But who knows on which day the salary will decrease?”
He said a few days later he interviewed for a job in a different division of the brokerage.
China’s securities brokerages were among the top pay masters in the private sector. This helped attract financial talent. However, since 2016, they have lost a bit of their sheen as IPO regulations tightened to avoid financial risk. This, in turn,
affected the fortunes of brokerages, market insiders said.
According to information provider Eastmoney, average annual salary of stock market analysts decreased from 639,500 yuan in 2015 to 433,800 yuan in 2016 and about 411,100 yuan in 2017.
Yi Ping, senior partner of management consulting firm Roland Berger, said salaries at securities brokerages mainly contain basic wages and commission fee.
“For personnel who complete some big projects valued at 1 billion yuan, he or she may get millions of yuan in commission,” Yi said. “But the workload is heavy and risk is high. It depends on whether you have projects and they go well.” profit of 131 securities brokerages from January to March
From January to March, revenue of 131 securities brokerages decreased 7 percent to reach about 65.9 billion yuan while net profit dropped 17 percent to 23.5 billion yuan, data from the Securities Association of China showed.
For brokerages, revenue from their investment banking division dropped by over 31 percent, while underwriting fee plunged by about 32 percent, and income from financial advisory services shrunk by about 30 percent, the SAC said.
So, companies have to thrive by decreasing wages, downsizing or by hiring more interns to control the cost of human resources, industry insiders said.
But Yi said the current situation is not dismal, so no alarm bells need to be rung. For, a brokerage may have diverse business divisions dedicated to mergers and acquisitions and value assessment for clients. Such niche services are still in demand on the back of a strong Chinese economy.
“It’s not a problem for the whole industry. If a company has other strong and profitable divisions to keep it running, it can still support sections that are weaker at the moment,” she said.