Global investment banks cut pay in Asia by between 30 and 40 percent last year , with many bankers receiving no bonus at all and pay for star performers flat at best as a global sector slowdown hurt, industry recruiters and sources within banks said.

For the last few years, while bankers in Asia were by no means immune from the industry's pay overhaul, top performers were rewarded and money, albeit less, did trickle down. That has changed for the 2011 pay cycle in Asia.

"The saying internally is that flat is the new up," said a Hong Kong-based vice-president at a U.S. investment bank.

On the rise this year has been the number of Asia bankers receiving 'bagels' or 'donuts' in industry jargon, which means zero bonus.

In Credit Suisse's Asia Fixed Income, Currencies and Commodities (FICC) division, as many as 50 percent of staff received no bonus, while the top 6 performers were paid more than last year and the remaining staff paid 30-40 percent less, according to an executive recruiter who did not want to be named.

At Citigroup, compensation for bankers in the institutional clients group fell by an average of 30 percent, according to the headhunter's data.

Sources with knowledge of the bank's compensation say a few poor performers saw their total pay package drop by as much as 70 percent, while those who had a good year were paid about the same as the previous year.

The U.S. bank paid all of the cash portions of its bonuses by the end of January, with the balance paid in stock vesting equally over four years, according to the sources.

At Bank of America Merrill Lynch, according to the headhunter, even outperformers in the FICC and Equities departments saw total compensation drop by as much as 20 percent, while underperformers lost 30 percent or more.

The bank paid a proportion of bonuses in cash that decreased on a sliding scale relative to the total amount paid, so that bankers receiving variable compensation -- or bonuses -- of between $100,000 and $250,000 would get 80 percent cash while stars in the $1 million to $2 million bracket would get 50 percent cash.

That cash proportion, the headhunter said, would itself be paid in the form of 25 percent immediate cash and the rest in stock vesting on February 15. That stock could be sold immediately, hence its being considered as part of the cash payment. Stock payments not considered as part of the cash portion would vest equally over three years.

Overall compensation at Morgan Stanley's FICC division in Asia fell by more than 30 percent, on average, according to sources.

All banks mentioned in the story were contacted by Reuters, and declined to comment. The recruiters and sources within banks quoted did not wish to be named due to the sensitive nature of the matter.

For Insider Video-Asia no refuge for investment bank job seekers.

Asia investment banking revenues are not going to be sufficient in the short term to support the rate at which the industry has expanded in the region, sources say, and global bosses are no longer as willing to subsidise Asia expansion with U.S. or Europe revenues on the expectation of greater growth.

That means slashing pay costs in Asia by any means: reducing overall pay, compensating in the bank's stocks rather than cash, halting benefits such as housing allowances, and in many cases paying no bonus at all.

In Asia, where average-performing bankers have in recent years still been reasonably well remunerated on the expectation of steady growth, pay gaps are widening.

"The Asia pay slowdown has taken longer than elsewhere, because of two factors that distorted the ecosystem. Firstly, you had regional players like Samsung Securities, Nomura and Daiwa as well as Jefferies pumping money into the system as they tried to build a bigger presence," said one head of investment banking for the region, explaining that those expanding firms forced compensation improvements at established banks to stay competitive.

"Secondly, you had a strategic premium for Asia that meant global bosses have been willing to overpay here. Now, however, there's a real problem because revenues have been stalled for the best part of a year."

Anecdotal evidence from inside top investment banking franchises in Asia paints a picture of gloom, with solidly performing individuals philosophical about their reduced earnings and laggards operating in a state of heightened anxiety as they await the tap on the shoulder from the human resources department that might signal their termination.

On average, bankers in Asia can earn the following overall (salary plus bonus) pay based on 2011 data, according to another headhunter: senior managing directors can earn between $1-$2 million; junior MDs $600,000-$1.25 million; executive directors $500,000-$1 million; vice presidents $350,000-$650,000 and associates $200,000-$425,000.

Crumbling Morale

In early January, a banker at a leading investment bank in Asia sat at her desk as the human resources department stalked the office floor, making her and her colleagues nervous.

The banker checked the internal messenger system constantly to reassure herself that her closest friends were still there, while keeping a lookout for internal emails bounced back by the server that might indicate a colleague had been fired. By the end of the day, the banker says, a fifth of the 60 people in her department were gone.

At another investment bank, a senior banker said, the layoffs took a week because a manager and human resources representative had to be present in each meeting. "The reason they took a week is that the slaughterhouse wasn't big enough," he said.

A source inside Credit Suisse says that this year's layoffs have happened in a slow trickle rather than one decisive blow, weakening morale as staff become fixated on their own survival.

There is, say headhunters and Asia investment bank heads interviewed for this story, more pain to come. Particularly under scrutiny are sector bankers, who traditionally cover an industry in Asia but who rely on their local colleagues in each country in Asia for client introductions.

"We are under pressure," says one industry coverage banker at a leading European firm. "There's intense pressure on every banker to deliver, and the sector guys will be the first to fall. It's all about client access, so if you rely on your country guy who has the language skills for all your business you could be in trouble."

With French banks BNP Paribas and Credit Agricole yet to announce compensation for 2011, the pay cuts and firings in Asia are not yet over. The two banks, expected to announce pay internally on March 9th and March 11th, respectively, are, according to one headhunter source, set to follow the herd in cutting total remuneration in Asia by at least 20 percent.

Rather than hoping for a big raise as they did in the pre-2008 boom years, most bankers now are hoping for only a modest cut in total pay with a few top performers dreaming of being paid the same as last year.

"We are going to be paid more like corporate bankers now," said one senior equity capital markets banker in Hong Kong.

"Top bankers are getting half what they earned in 2006 and 2007, and those numbers are probably going down further in the short term. I have friends who quit banking after 2008 calling me up now telling me how well they're doing at a corporate or a fund, laughing at me for still being in banking."

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