Next year's pay freeze for Hongkong Bank employees could trigger a domino effect and hit all 79,000 workers in the banking sector, analysts said yesterday. They said the freeze on 13,000 employees at Hong Kong's largest bank could also affect workers in other industries. Zuhair Khan, banking analyst at Clarion Capital, said: 'It would make it easier for other banks. Wage freezes are, of course, unpopular. Employers generally don't want to be the first to do it.' Legislator Lee Cheuk-yan said the bank was setting a bad example as it had made huge profits last year and continued to make money this year. So far, no other major banks have announced plans to freeze pay. Officials at Hang Seng Bank, Bank of China and Standard Chartered Bank said they had not reached a decision on next year's salaries. Hongkong Bank spokesman Gareth Hewett said the pay freeze was necessary in light of declining profits and a poor economy. Profits for the Hongkong Bank Group, which includes Hang Seng Bank, dropped 41 per cent to $6 billion in the first half of this year against the same period last year. Profits for Hongkong Bank alone dropped 58 per cent to $2.2 billion in the first half of this year. On Saturday, the banking group announced plans for a $387 million rechristening of its local and international operations, to HSBC. The proposed pay freeze could save the bank $200 million. Mr Hewett said next year would be the first time in 30 years the bank had not given employees a rise. Staff will still receive a month's bonus this year. Expatriate and senior employees, who are on a different pay scheme, will not know until next April how they will be affected. Andy Xie Guoshong, greater China economist for Morgan Stanley Dean Witter, said: 'It's just sound business practice. 'Property prices have dropped by over 40 per cent from the peak in mid-1997. Rents have gone down by 20 per cent. The first deflation was recorded in October and negative price increase is expected for next year, so [wages] must go down as well.'
