* Doubts over long-term outlook as jobs go at Goldman, BAML
By Spencer Anderson
HONG KONG, Oct 3 (IFR) - The future of Asian investment
banking is again under scrutiny as global banks scale back their
operations in the region.
Goldman Sachs and Bank of America Merrill Lynch are each
cutting investment bankers in response to declining advisory
fees and heightened local competition.
While the cuts in both cases span multiple products and
markets, fee data show that a slump in equity underwriting
revenues is exerting the greatest pressure.
Fees from Asia Pacific equity and equity-related deals have
plunged 23 percent this year, according to Thomson
Reuters/Freeman Consulting data.
In contrast, debt-underwriting revenues are up, while
regional M&A activity is down only about 5 percent on the same
period in 2015.
Bankers and analysts believe many more ECM cuts lie ahead as
Chinese banks continue to gain market share and offer far lower
"I'm not surprised at all that they are cutting jobs," said
Veronique Lafon-Vinais, associate professor of business
education at the Hong Kong University of Science and Technology,
who has also worked in banking in the US, Europe and Asia.
"If you look at investment-banking revenues in Asia they
have historically always tilted towards ECM. And now you have
Chinese banks coming in strong, so there is way more
Among the senior bankers leaving BAML are Peter Kim, head of
Korean investment banking and Niraan De Silva, head of
South-East Asia ECM and equity-linked capital markets
Asia-Pacific, sources told IFR.
Also departing in the Australia office are Ben Stewart,
senior manager of debt capital markets and syndicate and Guy
Foster, head of Australian ECM.
BAML planned to cut two dozen investment bankers across
Asia, Reuters reported last week.
Goldman is looking to reduce its 300-strong investment
banking workforce by up to 30 percent, according to Reuters. The
bank declined to comment.
Sinolink over Goldman
Figures from Thomson Reuters SDC show Goldman remains the top
M&A adviser for transactions with Asia Pacific involvement, but
has slipped from first to eighth on the Asia ECM league table.
In terms of fees, the US bank ranks only 15th for Asian
equity underwriting, excluding Australia, this year, behind the
likes of Sinolink Securities and Guotai Junan Securities.
In 2014, Goldman earned about $204 million from Asian ECM
underwriting, according to data from Thomson Reuters/Freeman
Consulting. Last year, it earned $107.7 million and, so far in
2016, it was taken in just $44 million. The data uses a
proprietary model to estimate earnings where fees are not
Goldman is far from the only Western bank experiencing Asian
ECM struggles. Deutsche Bank, which rose as high as third on the
same fee table in 2011, is now 16th. Credit Suisse has fallen
from second in 2014 to 34th in 2016.
The slowdown of US listings from China has been particularly
painful for Western arrangers, while Hong Kong IPOs now come
with inflated bookrunning syndicates and measly underwriting
The recent $7.4 billion listing of Postal Savings Bank of
China handed underwriters a $118 million payday, but that was
split unequally between 25 joint bookrunners.
DCM more resilient
While ECM bankers in Asia suffer, their debt counterparts remain
cautiously optimistic. Asia's bond markets are also becoming
more competitive, particularly in China and South Korea, but
global arrangers have so far managed to fend off regional
competition, and strong deal volumes mean the fee pool has
remained relatively stable.
Fees on G3 bond sales from Asia, excluding Australia, have
actually risen 14 percent from the same period last year, and
Bank of China and DBS are the only Asian underwriters among the
top 10 fee earners.
Still, DCM bankers are not counting on the fee pool to
remain stable. As the market evolves, they have to specialise
and look for areas where they have competitive advantages, such
as in certain private placements, local currencies and more
complex transactions, they say.
"The theme of lower fees is constant, but it doesn't have to
be earth shattering," said the Hong Kong-based head of DCM at a
"I can point you to places where you can get nice fees in
Asia, and I can also point you towards atrocious fees.
"We have to focus on areas where we can offer something
different. There's no doubt that the region, and especially
China, is overbanked."
(Reporting by Spencer Anderson; Editing by Steve Garton and