China’s biggest brokers downgrade bankers to economy class and hard berth seats to rein in costs and boost profits
- Starting this month, CSC managing directors’ domestic travel will be downgraded to economy flights, second class or hard-berth train seats
- Citic Securities also asked managing directors to fly coach, according to a separate memo
China’s two largest investment banks are making broad cuts to travel budgets that will impact junior bankers as well as senior directors as they seek to reign in costs and boost profitability.
Starting this month, CSC Financial managing directors’ domestic travel will be downgraded to economy flights and second class or hard-berth train seats, according to a memo seen by Bloomberg. Larger rival Citic Securities also asked managing directors to fly coach, according to a separate memo, which did not specify which class of travel they were previously offered.
Spokespeople for Citic Securities and CSC Financial didn’t immediately reply to emails seeking comment.
The cuts are another example of how policymakers are pressuring the nation’s biggest state-owned financial groups to reduce salaries and costs to support China’s recovery from the pandemic. Financial firms were given details on how to limit pay at the beginning of last year by the Ministry of Finance and entities including China’s massive sovereign wealth fund and its biggest bank were affected, people with knowledge of the matter have said.
CSC Financial’s Chairman Wang Changqing will travel first class instead of the more expensive business by train, according to the broker’s memo. Commuting costs in and out of airports will no longer be reimbursed as expenses but include a transport allowance of 80 yuan (US$12) per day, according to memos from both institutions.
While the cuts won’t stop executives travelling, they may dampen morale among bankers used to more attractive perks. Citic Securities also cut daily hotel allowances for non-executive bankers by 200 yuan to 700 yuan per day in major cities from Beijing to Shanghai, according to a person with knowledge of the matter, who asked not to be identified discussing private information.
Globally, banks are reassessing the need for travel and debating the extent of remote work. HSBC Holdings is budgeting for travel costs to fall by half, with greater reliance on video technology and having people go on fewer, longer trips when they do travel. Standard Chartered is also expecting travel costs to reduce sharply.
Citic Group, the parent company of Citic Securities, is seeking to broaden income sources and reduce expenditures, which the group’s vice-chairman Xi Guohua said last year will help deal with market uncertainty and boost growth.
Total assets at Citic Securities, China’s biggest broker, surpassed 1 trillion yuan for the first time last year while return on equity of 8.68 per cent still lagged Wall Street banks. At CSC Financial, in which Citic Securities held a 4.94 per cent stake, profit declined 12 per cent in the first quarter.
