Bank job cuts expected in Asia

Overall, investment banking fees raised by global banks in the Asia-Pacific fell 25% in 2023 from a recent peak of $40.6 billion in 2021, according to data from LSEG. Photo: REUTERS

HONG KONG:

Job cuts at Western investment banks in Asia are expected to increase this year as revenue pressures mount due to deepening economic and market turmoil in China, even as deal prospects brighten in Japan and India, headhunters and bankers said.

A new round of staff cuts that began in late 2023 in mainland China and Hong Kong, key regional investment banking hubs, will accelerate in the coming months, they added.

US boutique bank Lazard announced internally last month that it would close its Beijing office, with some employees being laid off and others set to relocate to Hong Kong, two people with knowledge of the move said.

Rothschild’s European counterpart spun off its Shanghai-based team in the fourth quarter, two separate people with knowledge of the matter said. Bank of America last month announced job cuts to more than 20 bankers in Asia. The sources declined to be identified as they are not authorized to speak to the media. Lazard and Rothschild declined to comment.

China’s stock markets hovering around five-year lows and the country’s weaker-than-expected recovery from the pandemic have heightened investor concerns and worsened the outlook for companies’ domestic demand. Geopolitical tensions have also driven away foreign investors.

“If the deal flow continues as it was in 2023, the market could expect some more cuts,” said Sid Sibal, vice president Greater China and head of Hong Kong, at recruitment firm Hudson.

China Agreements

Financial institutions have cut an average of about 20 percent of their workforces in Asia last year, with some reductions reaching the highest level since the 2008 financial crisis, Sibal said.

More than 400 investment bankers lost their jobs in Hong Kong alone, most of them focused on deals with China, said two investment bankers, who declined to be identified as they are not authorized to speak to the media.

“I don’t think Western investors will come back to see deals with China anytime soon,” said a head of regional investment banking at a major European bank, who also declined to be identified for the same reason.

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Global investment banks’ equity revenue from Chinese clients fell to $4 billion in 2023, down 30 percent from 2022, and mergers and acquisitions fell 16 percent to $629 million last year, according to LSEG data. Overall, investment banking fees raised by global banks in the Asia-Pacific fell 25% in 2023 from a recent peak of $40.6 billion in 2021, according to data from LSEG.

UBS plans to cut staff in the coming months as the China-focused Swiss investment bank’s bankers swell following its takeover of Credit Suisse, two sources with knowledge of its plans said.

UBS declined to comment.

“Episode Activity”

To cushion the impact of China’s slowdown, bankers hope a promising pipeline of deals from India to Japan will add more to Asian earnings. They warned, however, that increasing fee income would remain difficult in the near term.

“Most other Asian markets are very small or episodic in activity,” said Craig Koben, a former Bank of America senior banker in Asia and now a managing director at financial expert firm Seda Experts.

“Japan has depth as a developed market, but in most years revenues from Greater China have underperformed Japan by several times. India is growing fast, but fee differentials are narrow and nowhere near replacing China.”

Rahul Saraf, head of investment banking in India at Citigroup, estimates India revenue to grow between 15% and 25% for the industry, with a number of potential multi-billion dollar deals boosting the outlook.

“All banks will add resources to India, but I don’t think there is a shift from China to India or Korea to India.”

Published in The Express Tribune, February 10^u2024.

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