Written by a Vice President of Commercial Banking in Hong Kong
Commercial Banking Career Path in Hong Kong
Despite what you may see in the news, commercial banking in Hong Kong is booming still. If you go on LinkedIn, eFinancialCareers or indeed.com, you will find too many jobs to fill, from entry level to senior management. The unemployment rate is low – but this is because there simply are not enough qualified candidates.
My story goes like this. I was born and raised in Hong Kong but have Canadian citizenship. I attended an English Schools Foundation institution during high school and attended university abroad. I have right to work in Hong Kong. I grew up speaking Cantonese and English with an English-speaking maid and took Mandarin as a second language for my International Baccalaureate programme (my IB score was 40).
I got into the commercial banking new graduate program at a HK focused commercial bank and switched early to VP at a Chinese bank (all the headhunters tell you to do this). Salary is quoted monthly in Hong Kong and I am around HKD100,000 (USD 13,000) per month and will not disclose bonus as it is sensitive and wildly variable.
Breaking into Commercial Banking in Hong Kong
This path is still ideal – banks are looking for the ideal candidate that is perfectly trilingual in Cantonese, Mandarin Chinese and English (with good grades, good school and gets along well with Mainland Chinese people).
However, acceptable candidates are bilingual in English and Mandarin. You do not need to be fluent in either, but fluent in one and very good at the other. There are also Japanese, Korean, and Taiwanese banks that may also want you to speak Japanese, Korean or Hokkien dialect/Taiwanese. Cantonese is not important as simply too many clients are Mandarin speakers and credit is written either in English or standard Chinese.
Short of having a special skill, to get visa sponsored if you do not have right to work here, you will need very good grades, language skills and acceptable social skills – although social skills here are more culturally aligned with being humble and being quiet as opposed to being overtly confident. Asian culture is very deferential in nature.
For foreigners or overseas returnees, school is important. Often, students will make up for a bad GPA or school brand in undergrad by doing a masters program at a prestigious institution (even if the program itself is not reputable). Popular schools include all Ivy Leagues, MIT, University of Toronto, University of Chicago, Northwestern, London School of Economics, Imperial College, Oxford, Cambridge.
For local schools, commercial banks will hire front office staff in this order:
- Hong Kong University of Science and Technology
- Hong Kong University
- Chinese University of Hong Kong
- Poly U
- City University of Hong Kong
And everyone else is middle office, back office or janitor.
Obviously if you have great grades from HKU, this is better than someone with terrible grades at HKUST.
Hong Kong Commercial Banking Salaries
The general rule for Hong Kong is for western (US and European banks), expect the same compensation as New York and about 30% more than London. Tax is lower but rent is higher. Keep in mind that as you get paid more, your rent does not go higher (unless you move into a bigger place). Most locals live with their parents. The Financial Times recently put together an article where you will after taxes and expenses make 4x what you would in London and 2x what you would in New York.
If you start at HSBC in a commercial, corporate or investment banking role, you would be shocked at how high the base salaries are (sorry, bonuses are a little lower).
However, for Asian banks, salaries are low – from $15-25,000 per month (2-3k USD) with a few months as bonus. To get paid in an Asian bank, you have to jump over from a Western bank like someone else I know.
Major Banks in Hong Kong for Commercial and Corporate Banking
The biggest domestic banks are HSBC, Standard Chartered, Bank of China (Hong Kong) and DBS. Now strictly speaking none of these ones are actually truly domestic banks (London, London, Beijing, Singapore), but they are the local giants.
Hang Seng (majority owned by HSBC), Bank of East Asia, China Merchants Bank, China Minsheng Bank, Dah Sing, CITIC, and plenty of Mainland Chinese banks round out the rest in an extremely competitive market. Milton Friedman was correct – Hong Kong is pure capitalism, warts and all. The Japanese (Bank of Tokyo-Mitsubishi, Sumitomo Mitsui Banking Corporation, Mizuho Bank) also deploy large amounts of capital here.
But practically every single bank in the world has some sort of operation in Hong Kong, from Rabobank to ICICI to ANZ to BBVA to Scotiabank.
Of course, the bulge bracket investment banks will also have their corporate lending practices here as well, including Barclays, Morgan Stanley, Bank of America Securities. These guys get the same base salaries as investment banking, so at Hong Kong’s 17% tax with deductions you are living better than investment bankers in other cities.
Chinese banks are aggressively expanding and growing market share. Watch for ICBC, Bank of China, Bank of Communications, Agricultural Bank of China and China Construction Bank to have a much larger presence in a few years. One day, it will be difficult to tell when you cross the Hong Kong-Mainland China border when you realize all the shops and services are the same.
Commercial Banking in Asia versus the United States and Europe
Commercial banking is different in the way that Hong Kong corporates like to stay closely held and family controlled much more than US ones. Also, once you get to the larger corporate level, the relationship manager tends to stay the same (as opposed to getting pawned off to corporate banking and investment banking). Some RMs follow their clients from a small corporate to being a billionaire.
I have heard from expats that the culture at local banks is far more political, but yet far less politically correct. I am aware that certain social movements have taken place across the world and can assure you that they are basically ignored completely here.
From an actual loan book perspective, you should be aware that the big business in Hong Kong is not for Hong Kong corporates but rather Mainland Chinese ones. Hong Kong is simply not big enough of an economy and does not have scale advantages since there are only 7.5 million people.
Mainland Chinese use Hong Kong banks to raise money at a far lower rate (PBOC rate is high, while HKD is pegged to USD and the Fed is cutting rates AGAIN). They sometimes will swap the money back to RMB which ends up being additional lucrative business for HK banks. Use of funds can be anywhere from operations to dividends – owing to the onshore offshore yuan dynamic, lending can be tricky with various subsidiaries and unforeseen structural subordination.
There are huge amounts of capital in bilateral as well as small club syndicated loans. These loans can be revolver but are also often drawn term loans, which means very juicy returns for the banks.
Drivers of Commercial Banking Growth in Hong Kong
The space is always evolving – as the Chinese government looks to liberalize interest rates, the idea is that more and more firms will start to have access to capital instead of going through extra intermediaries through very expensive private banking.
As a gross oversimplification, State Owned Banks have historically borrowed from the central government/People’s Bank of China at a set rate and lent out at a set rate. Now the thing is, different borrowers have wildly different credit profiles, so if you are getting the same rate back you will only lend to the safest borrowers who are other State Owned Enterprises.
This is changing and there are many moving parts. Liberalizing interest rates mean that banks will start to lend a lot more and new banks will jump into the market. This also means that the State Owned Banks will see their interest margins erode, but possibly gain more volume and higher margins from riskier credits. An exciting time to be a commercial banker.
Also, as the world becomes more international, other commercial banking products such as trade finance and letters of credit start to grow as well. Transaction banking and trade finance are super boring but apparently stable and lucrative jobs.
Slowing Chinese Economy and Effects for Commercial Banking
I won’t discuss the riots here but my opinion is that it will not have a big effect – as I mentioned above, Hong Kong is really banking China. China will continue to grow.
However, the news repeatedly brings up a hard landing for China’s economy and the slowest growth rate of 6%. Does this affect commercial banking business?
Our bank’s view is that it will not. What is happening is that the government is letting this slowdown happen because they want to focus on qualities that are not captured in GDP, such as clean energy, urbanization, mass transport, and efficiency.
They are letting bad companies fail, whereas previously these firms were always bailed out. This is a healthier market and it means that banks will start to lend more to firms that are actually growing organically and can actually pay them and not default.
Additionally, these good firms are growing overseas and require the platform of a commercial bank that has connections abroad. Also, 6% of $14 trillion is a huge new pie to be split.