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Deluge of M&A deals pays off for SE Asia's banking rainmakers

Lawrence White and Michael Flaherty
Sunday, 1 Dec 2013 | 10:52 PM ET

HONG KONG, Dec 2 (Reuters) - A recruitment firm looking to track down Asia's most highly prized investment bankers would normally begin searching in their natural habitat - Hong Kong.

Now, a headhunter would more likely book a flight to Manila, home to one-man deal factory Lauro Baja of Swiss bank UBS.

Baja is among Asia's highest-paid bankers with estimated income topping $3 million, according to recruitment consultants and a former UBS colleague, and he personifies Southeast Asia's emergence as a major new centre for deal-makers.

The region has seen $46.5 billion worth of capital raisings and mergers and acquisitions over the last two years, up 9 percent on 2010-11, Thomson Reuters data show. The data includes M&A deals that have been announced but not yet closed.

That has created fevered demand for the few experienced, connected bankers who can make those deals happen.

"In Southeast Asia you have a miniscule pool," said Russell Kopp, managing director in Hong Kong at executive search firm Correlate Search. "Everybody knows who they are, and there's probably only three people who could fill each of these very specific roles, so that drives up pay."

Financial industry recruiters and hiring managers at investment banks say that some recent poaches of Southeast Asian bankers involve total compensation packages of around $1 million or more - putting them on par with many Wall Street colleagues.

That would be still much less than what UBS banker Baja earns in a good year at his post in the Philippines, which has seen a steady wave of stock, debt and merger deals since 2009.

Baja, who declined to be interviewed for this article, is known as a savvy and well-connected banker whose father was a Philippines ambassador who at one time also served as president of the U.N. Security Council.

Baja's 2002 wedding was a top story in Manila's society pages, attended by former presidents Gloria Macapagal-Arroyo and Fidel Ramos and an array of elite politicians and bankers.

"He's the 10,000 pound gorilla," said a Singapore-based investment banker who competes against UBS. "We've tried to hire him, but we can't afford him."

DRIER TIMES FOR CHINA RAINMAKERS

Big rainmaking contracts for connected bankers in Asia was once the realm of China dealmakers, who earned premiums sometimes worth millions of dollars over their peers in New York and London to take on a vast and growing market.

As Greater China deal volumes have fallen, that premium has shifted to Southeast Asia where they have steadily risen, with investment banking fees jumping to an estimated $1.6 billion last year, up 23 percent from 2009, Thomson Reuters data show.

That compares with a 6 percent decline in fees for China investment banking fees -- excluding local A-share deals -- over the same period, Thomson Reuters data show.

Among Southeast Asian M&A markets, Philippines has brought down a shower of fees for rainmakers like Baja of UBS.

Through stock, bond, and M&A advisory and underwriting, UBS earned an estimated $28.7 million in fees in the Philippines this year, Thomson Reuters data shows, taking 17 percent market share or more than double the next-best bank, Deutsche Bank . Those fees do not include work such as broking and derivatives.

Bankers in a relatively small but active market such as the Philippines benefit from fee distributions going to a small pot of advisers, as opposed to larger markets.

A managing director in the capital markets division at a top investment bank in Hong Kong can earn around half of Baja's estimated total compensation in a good year, according to banking recruitment specialists who declined to be identified.

Baja was the third highest taxpayer in the Philippines in 2011, according to a list released by the Bureau of Internal Revenue, when he paid 34.3 million pesos ($786,984). In 2012 he was 26th on the list, paying 26.3 million pesos in tax.

"Six, seven years ago, nobody gave a damn about hiring and comp' in this part of Asia," said one veteran Southeast Asian banker. "That changed in the last 24 months."

POACHING SEASON

Deal fees have also rained down on Thailand and Malaysia.

Deutsche Bank's hire in July of UBS's veteran head of investment banking in Thailand, Phumchai Kambhato, nearly doubled his compensation, according to people familiar with the matter. One head hunter familiar with the matter said that would mean a package of anywhere from $600,000 to $1.5 million.

In October, UBS hired Sufyan Abdul Jabbar from Malaysia's CIMB for a top banking role in that country. One person familiar with the matter said Jabbar's move handed him a compensation package of nearly $1 million.

"The hirings you're seeing now are way off the local rate," said the person. Another person said Jabbar's offer was slightly less than that.

Deutsche Bank and UBS declined to comment for this article, citing company policy not to talk about individuals' pay. Jabbar and Kambhato did not respond to calls seeking comment.

Estimated fee revenues in Malaysia for arranging bond, equity, debt and M&A deals amounted to $633.8 million last year, Thomson Reuters data shows, the largest haul in the region and 32 percent higher than the next highest country, Singapore.

This year, Goldman Sachs earned hundreds of millions of dollars from arranging debt offerings for a single Malaysian client, state fund 1MDB, IFR reported. Goldman Sachs declined to comment.

"Everyone is fishing from the same pond, which puts pressure on salary expectations and leads to wage inflation," said Mark Ellwood, managing director for Southeast Asia at recruitment firm Robert Walters.

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