With the UAE's financial system becoming significantly more stable over the past year, salary levels at most banks are holding steady and there is a good chance of bonuses reappearing in 2010 after a very dry 2009, say compensation experts.
Expert opinion, however, remains divided on whether it will be investment banking or the retail sector that will lead the charge in bank salary hikes in 2010.
"The [investment banking] sector kept a low profile in 2008/9. However, things are about to pick up again. The vacancy flow for the first quarter 2010 [till date] is impressive, as is the market sentiment," Hasnain Qazi, Middle East Business Manager for Pathway Resourcing, told Emirates Business.
On the other hand, Adel Al Alawi, CEO at GulfBankers, is upbeat on retail banking. "Salaries will go up but not in a big way due to low levels of inflation," he said.
"As far as investment banking is concerned, there's still business happening," added Ian Giulianotti, Associate Director at Nadia Recruitment and Management Consultancy. "Hiring is down but not as much as we'd expected and salaries are still competitive. In the case of investment banking, we must remember that the biggest part of the salary is bonus and commissions, which have been under pressure," he pointed out.
Shane Phillips, Consultant at Stanton Chase, said basic earnings of investment bankers had suffered drastically. "On an average, I would say salaries in investment banking in the UAE have gone down by 20-45 per cent in 2010 as compared to 2009. For example, a junior MBA commanding $85,000 [Dh312,205] per annum earlier is now expecting $60,000-65,000 [in basic pay]," he said.
However, rising regional deal-making and investment management activity augurs well for overall compensation packages of investment bankers. "Last year, there was a huge reduction in activity when it came to selling investment products but this year activity is up. This is one of the first signs that things are on the up," said Qazi.
Alawi, nevertheless, believes that the presence of a large number of investment banks in the region will continue to keep a check on individual banks' growth and, ultimately, salary levels.
The bonus battlefield
Experts have conflicting views on bankers' bonuses too. "Bonuses should be better this year, however, it is unlikely they will return to 2006/7 levels," said Qazi.
"We expect bonuses to be given out by investment banks in 2010," concurred Giulianotti. "There were people who got bonuses in 2009 as well, but banks were unwilling to talk about this last year."
Phillips, however, believes that 2010 may well be another dry year for investment bankers as far as bonuses are concerned. "I expect bonuses to return in 2011, not 2010," he said. "As far as bonuses are concerned in retail banks, Islamic banks, which have been doing well, are paying bonuses as well as some divisions in the conventional banks."
Performance-linked bonuses will continue to remain constrained when compared to peak 2007/08 levels.
"Bonuses can be expected this year, but this should not be compared with 2008 levels," said Alawi.
"Bonuses have disappeared and there have been no signing bonuses. Joining bonuses were paid in boom times to ensure that candidates were available on the respective start dates, but that is not happening anymore. Employers are confident and no longer worried about candidates receiving competing offers," added Phillips.
"Even last year there were banks that paid bonuses to their employees. There were some banks that had to forego giving out bonuses last year due to their severe exposure to toxic assets. On the other hand, there were other institutions with minimal exposure and these were the ones to hand out bonuses," agreed Alawi.
"Earlier, bonus was virtually unlimited for the higher strata of bankers [including CEOs and MDs] and depended largely on deal-making," said Phillips. "The commission will again depend on what deals the candidate would be working on and post-crises there has not been much happening on the deal-making front."
The basic pay differs in many aspects, experts said. Salary levels for the same position in the same bank could be different, they said, citing various factors at play.
"For example, analysts who are junior MBAs with a degree from Wharton with work experience at Goldman Sachs will command salary on the higher range [$120,000] in comparison to somebody who has graduated from a Tier 2 B-School and no experience, who will have to settle with a starting level salary [$65,000 to 85,000]," said Phillips.
"The salaries will also depend on experience level – if the candidate has worked on larger, more complicated deals in the past, he will command a higher pay."
In the retail banking segment, however, compensation hikes might be limited to an increase in the performance bonus, said experts.
"As far as retail banking is concerned, many banks have laid off a lot of people over the past year and we've seen a general move towards outsourcing. We don't expect any hike in salaries nor do we expect any bonuses this year," said Giulianotti.
He was quick to point out that salaries would continue to hold at the current levels as employers in the country are contract-bound. "There will be no drop in salary levels in 2010 compared to last year as it's very difficult to reduce the packages of the current employees," he said.
Phillips agreed: "There has been no substantial drop in salaries in retail banks as large international banks have stringent regulations."
Nevertheless, as Giulianotti pointed out, new hires will be at a disadvantage this year owing to a larger talent base eyeing a shrinking employment pie. "Banks may pay less to new hires. For example, the salary of an existing teller can be Dh5,000. But in the case of a new hire, it may go down to Dh4,000 and if it's an outsourced teller, it may even come down to Dh3,500," he said. "Two areas where retail banking is growing are risk management and compliance, where salaries are still holding up."
In 2008, the average increase in salaries in the banking sector was 12 per cent over 2007. In 2009, the increase was five per cent wherever it happened. Largely, there were no increases last year and no bonuses.
In 2010, I don't expect any hikes in salaries and there will be no bonuses as there are many good people available. Last year, there were 16 per cent redundancies across the board and about 12 per cent were in the banking sector. Of the 16 per cent, four to five per cent jobs might have been filled by [less expensive] employees.
- Ian Giulianotti, Associate Director at Nadia Recruitment and Management Consultancy
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