From Breakingviews: Morgan Stanley, Goldman Sachs and rivals are trimming jobs in Greater China. Even when activity picks up, boosting market share there will be tough. The usually dominant financiers will remain fringe players, says AntonyMCurrie
and other multinationals with big operations in China need banking services like cash management, loans and currency hedging. Chinese companies venturing overseas need international lenders and advisers on their side, too, as the domestic banking powerhouses have for the most part had little success expanding overseas. At some point Hong Kong IPOs and cross-border M&A are likely to perk up.
Yet those opportunities remain in the future. Greater China accounted for perhaps 8% of Morgan Stanley’s top line last year, assuming the region contributed three-fifths of the bank’s Asia revenue. Those numbers are similar for Goldman and JPMorgan – and have not varied much over the past five years or so.
In the meantime, geopolitical tensions will weigh on capital flows and corporate activity. That in turn will keep up pressure on profit margins; Goldman’s pre-tax profit as a share of revenue in Asia fell by more than a third to 21% last year. Nevertheless, the possibility of making even modest gains in a big capital market remains too good to pass up.
Bank of America has told around 40 bankers in Asia to look for new roles in the organisation, Reuters reported on May 25. Most of the affected workers are in junior roles or in China equity capital markets, with a few in banking and markets. Morgan Stanley may reduce its staff in the Asia-Pacific region by as much as 7%, with China-focused investment banking businesses taking much of the hit, Bloomberg reported on May 16. A day later Bloomberg added that Goldman Sachs and other rivals may follow suit; the news organisation also reported that Morgan Stanley is delaying plans to build a brokerage on the mainland and that Goldman has revised downwards its projections in its five-year plan for its business in the country.
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