December 23, 2008 / 10:51 AM / 10 years ago

Jobs axe hangs over investment banks in Asia

HONG KONG, Dec 23 (Reuters) - Investment bankers in Asia fear more job cuts in the next few weeks, having largely escaped the latest global layoffs that hit colleagues in other regions.

Layoffs in the industry could soon slice more than 1,000 jobs at Wall Street and European banks in Asia, industry sources say. Several hundred were wiped out here in the past month.

“It sounds like it’s already starting to get bloody,” said a Hong Kong hedge fund manager who works with investment banks.

Among the banks likely to be hit hard is Merrill Lynch MER.N, sources say. Its job reductions in Asia so far have been relatively small and the Wall Street bank is weeks away from being absorbed by the rescue of Bank of America Corp (BAC.N).

But Merrill is not alone, according to sources who asked not to be named as they work at or with investment banks.

They said Goldman Sachs (GS.N), even after recent layoffs in Asia, is not done yet.

Citigroup (C.N) and Morgan Stanley (MS.N) have also shed jobs in Asia and, while some sources say these banks can maintain headcount levels through the first quarter, others aren’t so sure. The first and second quarters of 2009, globally, are expected by bankers to be worse than the last two.

If the banks don’t move soon to reduce headcount, they are likely to strike at the end of the first quarter.

The corporate scythe set to swing through Asia’s investment banking industry highlights how quickly growth has slowed or, in some cases, stopped across banking divisions in a region that was thought to be thriving less than a year ago.

“Where it was somewhat more active through most of the year, Asia is slowing down. People were insulated, but now it’s getting to the point where everything is declining at once,” said the hedge fund manager.

All banks mentioned either declined to comment or did not return messages seeking comment for this article.

Merrill and Morgan Stanley handed out year-end pay in the last week, sources say, with some bankers earning bonuses in an otherwise dismal year. The bonuses, in many cases, were less than expected, though many were happy to get a bonus at all.

For those who got no bonus, bankers say they will either take the hint and leave or accept that it may be a while before they receive a hefty year-end sum.

An investment banker typically earns a low, six-figure salary but is eligible for a $1 million bonus or more.

Banks often cut staff before granting bonuses to save money. Citi, Goldman, Credit Suisse CSGN.VX and Deutsche Bank (DBKGn.DE) are due to give bonuses at the beginning of next year.

Credit Suisse trimmed relatively few jobs in Asia this year. But earlier this month, the Swiss bank said it planned to cut 5,300 jobs mainly in investment banking. The cuts are expected to soon hit its Asian hubs such as Hong Kong, with pink-slips coming before the New Year.

For some banks, the cuts will be part of previously announced plans. For others, the layoffs will be new, sources say.

“We’re talking about hundreds this time,” said a Hong Kong-based investment bank employee, speaking about projected cuts at his U.S. bank. Cuts in the last month have ranged from 75-100 at some banks.


Depending on the size of the bank, Wall Street on average has a few thousand employees throughout Asia. Historically, investment banks have staffed up heavily in Asia during good times, and slashed heavily during downturns.

“They always overhire and overfire in Asia,” said the hedge fund manager.

One banker, who was in Asia during the regional financial crisis a decade ago, said banks cut around 50 percent of investment banking jobs then. Granted, overall staff sizes at the banks were much smaller than they are now.

And the economic picture in Asia is not as grim as it was a decade ago. Still, in most places, it doesn’t look pretty.

After Asian economies began to sputter earlier this year, things quickly went downhill. Currencies were battered, equity and debt markets shut, exports lost speed and commodity prices plunged.

That has left New York and London-based banks in Asia with less activity, in particular, in their equity capital market, equity linked product, prime brokerage and leveraged finance divisions.

Back office staff are also expected to be reduced.

Asia, despite its opportunities, has in the past generated a relatively small percentage of revenues for banks. Last year, UBS generated 11 percent of its global, core investment banking revenue from Asia, excluding Japan and Australia.

Citigroup’s Asia division contributed $4.6 billion to the bank’s profit last year, more than half of which came from investment banking and trading.

Asia-generated profits from most Wall Street banks have since tumbled. And, while opportunities remain, the bodies needed to keep those profits churning appear to be no longer needed. (Editing by Ian Geoghegan)

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