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Kane Wu and Serena Lee
HONG KONG (Reuters) – Headhunters and bankers say the prospects for deals are brighter in Japan and India, but earnings pressure is rising due to deepening economic and market turmoil in China. Job cuts at Western investment banks in Asia are expected to widen this year.
It added that new job cuts that began at the end of 2023 in mainland China and Hong Kong, the region’s main hubs for investment banking, will accelerate in the coming months.
U.S. boutique bank Lazard announced internally last month that it would close its Beijing office, resulting in some employees being laid off and others relocating to Hong Kong, people familiar with the move said. Two people revealed.
European peer Rothschild disbanded its Shanghai-based team in the fourth quarter, two people familiar with the matter said. Bank of America announced last month that it would cut more than 20 bankers in Asia.
The officials declined to be named because they were not authorized to speak to the media.
Lazard declined to comment. Rothschild did not respond to a Reuters request for comment on the situation in Shanghai.
China’s stock market hovering near five-year lows and a weaker-than-expected recovery from the pandemic are deepening investor anxiety and hurting business prospects for domestic demand. Geopolitical tensions are also deterring foreign investors.
“If deal flows continue as they have been in 2023, the market may expect further reductions,” said Sid Sibal, vice president of Greater China and head of Hong Kong at recruitment firm Hudson.
trading with china
Sibal said financial institutions cut an average of about 20% of their workforce in Asia last year, with some cuts reaching the highest levels since the 2008 financial crisis.
More than 400 investment bankers have lost their jobs in Hong Kong alone, most of them focused on doing business with China, according to two investment banking headhunters.
“I don’t think Western investors are going to come back to consider China deals any time soon,” said a regional investment bank head at a large European bank who declined to be named for similar reasons.
According to LSEG data, global investment banks’ income from equity business from Chinese clients will fall to $4 billion in 2023, down 30% from 2022, and M&A revenue will fall by 16% to $629 million last year. It became a dollar.
Overall, investment banking fees collected by global banks in the Asia-Pacific region fell by 25% in 2023 from a recent peak of $40.6 billion in 2021, according to LSEG data.
UBS plans to cut jobs in the coming months after the Swiss investment bank’s China-focused banker swelled after its acquisition of Credit Suisse, two people familiar with the plans said.
UBS declined to comment.
“Episode-like activities”
To cushion the impact of China’s economic slowdown, bankers are hoping that a promising deal pipeline from India to Japan will make an even bigger contribution to Asian earnings. However, they cautioned that fee income growth remains difficult in the short term.
“Most other Asian markets are either too small or too inactive,” said Craig Corben, former senior banker for Asia at Bank of America and now managing director of financial expert witness firm Seda Expert. It’s too temporary.”
“Japan has depth as a developed market, but in normal years, revenues in Greater China seem smaller compared to Japan’s several times.India is growing rapidly, but its fee spreads are tight, making it far behind China. It is far from being replaced.”
Rahul Saraf, Citigroup’s head of investment banking in India, said he expects multi-billion dollar deals and India’s revenue to rise 15% to 25% across the industry.
“All banks will add money to India, but I don’t think there will be a shift from China to India or from South Korea to India.” (refiled to correct)
(Reporting by Serena Lee and Kane Wu in Hong Kong; Additional reporting by Scott Murdoch in Sydney, Roxanne Liu in Beijing, Sinead Crews in London and Ranan Nguyen in New York; Editing by Sumeet Chatterjee and Jacqueline Wong)
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