According to headhunters and bankers, job losses at Western investment banks in Asia are anticipated to escalate this year as revenue constraints mount from China’s escalating economic and market unrest, even as transaction opportunities improve in Japan and India.

They also stated that a fresh round of layoffs, which started in late 2023 in Hong Kong and the Chinese mainland, two important regional centres for investment banking, will pick up steam in the upcoming months.

According to two persons with knowledge of the matter, U.S. boutique bank Lazard stated internally last month that it was closing its Beijing office, which meant that some staff would be laid off and others would be moved to Hong Kong.

Two different persons with knowledge of the situation indicated that its European rival Rothschild dissolved its Shanghai-based team during the fourth quarter. Over 20 bankers in Asia lost their jobs, according to a Bank of America announcement last month.

Since they are not permitted to speak with the media, the sources chose not to be identified.

There were no comments from Lazard and Rothschild.

With China’s stock markets at five-year lows and the nation recovering from the pandemic less quickly than anticipated, investor concerns have grown and the outlook for domestic demand from companies has soured. Foreign investors have also retreated due to geopolitical pressures.

“If the deal flow continues the way it has been 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.

According to Sibal, financial institutions in Asia reduced their headcount by almost 20% on average last year. In many cases, these reductions were the biggest since the 2008 financial crisis.

Two investment banking headhunters, who wished to remain anonymous because they are not permitted to speak to the media, claimed that around 400 investment bankers lost their jobs in Hong Kong alone, with the majority of them being involved in transactions involving China.

“I don’t think western investors will come back to look at China deals soon,” said a regional investment banking head at a large European bank who also declined to be named for the same reason.

According to data from LSEG, global investment banks’ revenue from their stocks business from Chinese customers fell to $4 billion in 2023, 30% less than in 2022, while M&A saw a 16% decline to $629 million last year.

According to LSEG data, the total amount of investment banking fees that global banks in the Asia Pacific region earned fell by 25% in 2023 from a recent peak of $40.6 billion in 2021.

In light of the growth of its China-focused bankers following its acquisition of Credit Suisse, UBS is intending to reduce personnel in the upcoming months, according to two sources with knowledge of the company’s plans.

There were no comments from UBS.

Bankers are expecting that a promising deals pipeline from India to Japan would make significant contributions to Asian revenue, in an effort to mitigate the impact of China’s slowdown. They did, however, issue a warning that growth in fee income would continue to be difficult in the foreseeable future.

Craig Coben, a managing director at financial expert witness firm Seda Experts and a former senior banker in Asia for Bank of America, stated that “most other Asian markets are too small or episodic in activity.”

“Japan has depth as a developed market, but in most years Greater China revenues have dwarfed Japan by several times. India is growing fast, but fee spreads are tight and it’s not close to replacing China.”

According to Rahul Saraf, head of Citigroup’s investment banking division in India, the industry’s revenue in India is expected to expand by 15% to 25%, with several potential multibillion-dollar deals contributing to the positive 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.”

(Adapted from USNews.com)

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