May 19, 2024

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Morgan Stanley, HSBC cutting Asia investment banking jobs on China deals slowdown

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Morgan Stanley, HSBC cutting Asia investment banking jobs on China deals slowdown

(This April 16 story has been refiled to correct the grammar in paragraph 6)

HONG KONG (Reuters) – Morgan Stanley and HSBC are cutting dozens of investment banking jobs in the Asia Pacific region this week, sources said, as they ramp up cost-cutting, with weaker dealmaking and sluggish markets in China and Hong Kong weighing on business prospects.

Morgan Stanley is cutting at least 50 investment banking jobs in the region starting this week, three sources with knowledge of the matter said, affecting around 13% of the Wall Street bank’s Asia investment banking workforce of 400.

Layoffs at the investment banking unit of HSBC, which makes the bulk of its profits in Asia, started on Tuesday and are expected to see the departure of around 30 dealmakers in the region this week, three separate sources said.

All of the sources declined to be named as they were not authorised to speak to the media.

Morgan Stanley declined to comment on the job cuts.

An HSBC spokesperson said the bank is continuing to invest in and grow its business, allocating people and resources to immediate opportunities, but declined to comment on the job cuts.

More global investment banks may follow suit in the near future as they come under increased pressure to rein in costs amid rapidly falling income from the capital market and M&A advisory businesses.

The move marks a reversal of fortune for Wall Street banks in Asia which had expanded their operations a few years ago to grab a bigger share of the dealmaking activities in the region, especially in China.

The cuts at Morgan Stanley and HSBC are among the largest for the two banks’ China-focused investment banking teams and follow similar measures by other banks stung by a decline in deal-making activities in China amid a slowing economy.

The top listing destinations for Chinese companies are facing a drought in dealmaking and shrinking valuations.

Hong Kong’s stock exchange saw 12 initial public offerings (IPOs) raise HK$4.7 billion ($600.28 million) in the first quarter, a drop of 30% year-on-year and the worst since 2009, according to data from Deloitte.

Money raised via IPOs by Chinese companies, including both on onshore and offshore bourses, plunged 80% in the first quarter of this year compared to a year-ago period to $2.9 billion, according to LSEG data.

IPOs in mainland China dropped 82% from a year earlier to just $2.4 billion during the same period, the smallest quarterly fundraising since the fourth quarter of 2018, the LSEG data showed.

The total value of merger and acquisition deals with China involvement shrank by 36%, according to LSEG data, pointing to smaller fees bankers earned from clients by advising on such transactions.

As a result, a new round of staff cuts that began in late 2023 on the Chinese mainland and Hong Kong, key regional investment banking hubs of Western banks, is set to gather pace this year, bankers and recruiters have said.

In January, Bank of America laid off around 20 bankers in the region, following a flurry of investment bank downsizing by UBS, Citigroup and other boutique firms.

Outside Asia, U.S. banking giants overall continued to shed employees in the first quarter, with Citigroup seeing the biggest drop. Banks are under pressure to control costs due to the uncertain economic outlook.

(Reporting by Selena Li, Julie Zhu and Kane Wu in Hong Kong, Scott Murdoch in Sydney; Editing by Sumeet Chatterjee, Jacqueline Wong, Chizu Nomiyama and Nick Zieminski)

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