Chinese banking sector hit by pay cut avalanche, salaries plummet from 10K+ to <1K yuan

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25th May 2024 – (Hong Kong) The banking sector in mainland China is experiencing a widespread wave of salary reductions, with employees reporting a drastic decrease in their monthly earnings. According to a report by “The Paper”, Zhao Jia (pseudonym), a customer manager at a local bank in western China, received her salary for the current month, which amounted to less than 1,000 yuan after considering base pay, performance bonuses, and mandatory deductions for social insurance and housing fund. This figure is a significant decline from the previous month when she earned over 10,000 yuan. Zhao Jia, who has 12 years of experience and primarily handles deposit and retail business, is particularly affected by the reduction in monthly performance bonuses, which has led to her salary plummeting by over 90%.

In addition to the salary cuts, delayed payments have also been reduced. According to Zhao Jia, based on the employment contract, she should receive a certain proportion of the previously withheld performance bonuses each year. However, this year, the delayed payment of performance bonuses has decreased compared to the contractual terms. While the bank will eventually distribute the withheld portion, Zhao Jia expressed uncertainty about the specific timing.

Furthermore, employees reveal that banks have set unrealistic performance targets, with penalties imposed for failure to achieve them. The banks have not directly informed their employees about a decrease in salary budgets but have instead raised assessment standards, effectively reducing employees’ salaries.

The trend of salary reductions in the mainland Chinese banking industry is also evident in the statements of various bank executives. During a performance briefing, Zhao Fei, Chairman of Bank of Zhengzhou, mentioned that the bank has proposed a “lean frontline, optimised resource allocation” and “cost reduction and efficiency enhancement” strategy, which includes a 10% annual reduction in senior executive salaries for two years starting from 2024. The bank plans to reallocate the adjusted salary resources to grassroots employees while optimising the distribution of compensation.

The phenomenon of “reverse salary claims” by several listed banks has also drawn attention in the market. As of the end of March this year, at least seven listed banks disclosed the specific details of reclaiming performance-based compensation given out in the previous year, amounting to a total of 52.8097 million yuan.

Financial data from Wind, a mainland Chinese financial data provider, indicates that in 2023, the average net interest income of 42 A-share listed banks was 101.177 billion yuan, representing a 1.52% year-on-year decrease. Data disclosed by the China Banking and Insurance Regulatory Commission reveals that as of the end of the fourth quarter of 2023, the net interest margin of mainland commercial banks was 1.69%, a 0.05 percentage point decrease from the first quarter of 2023.

Observing the situation from a branch of a major state-owned bank in southern China, the branch manager noted that in recent years, many young employees have left their banking jobs due to high work pressure. They often find that the rewards do not match the effort they put in, and some new hires leave within 2-3 months. Consequently, the remaining employees are mostly middle-aged individuals who prioritize stable employment to support their families.

According to Wind data, in 2023, the average growth rate of operating income for the 42 A-share listed banks was 0.94%, a decrease of 2.23 percentage points compared to 3.17% in 2022. The average growth rate of net profit attributable to shareholders was 5.13%, declining by 5.81 percentage points from 10.94% in 2022.