Goldman Sachs is poised to cut investment banking headcount in Asia by around a quarter after revenues halved during the first half of the year, according to one person familiar with the matter.
The layoffs of around 75 people across Asia excluding Japan and Australia will be deep and “somewhere between 20% and 30%, although the 30% number is too high,” said the person.
Goldman will make the people redundant later this year; they have not yet been told, the person said. The firm has around 300 investment bankers in the region, excluding Japan, Australia and assistants in the corporate finance division.
The US firm's decision is one of the most dramatic examples this year of how fierce competition and a slide in revenues are impacting the business of investment banking in the region.
The New York-headquartered bank’ revenues across Asia Pacific during the first six months of the year fell to $1.712 billion representing, 12% of the group’s revenue, down from $3.558 billion, an 18% contribution.
Goldman has previously trimmed staff in the region this year across its trading division, but not in one fell swoop, said one headhunter in the region. The firm has around 3,000 people in the region across all divisions but exluding Japan, Australia and Bangalore.
Competition for investment banking fees is fierce, especially from Chinese brokers. Global bulge bracket banks in Asia Pacific ex-Japan accounted for 21% of investment banking revenue in the year up to August, the lowest year-to-date share on record and down from 24% in 2015. Their share is down 19 percentage points in the region over the last decade.
A good example of the increased competition has come from the IPO market. Everbright Securities' $1.1 billion listing in August was jointly managed by 20 bookrunners, the largest syndicate in an Asia Pacific offering since 22 bookrunners managed the $2.5 billion China Huarong Asset Management IPO in October 2015, according to data provider Dealogic. But that record was handily beaten earlier this month, when 26 banks helped manage the $7.43 billion listing of Postal Savings Bank of China.
Goldman is not alone in mulling layoffs. Barclays closed its cash equities division in Asia in January and laid off investment bankers; Nomura cut staff in its Asia ex-Japan equities division earlier this year; Macquarie cut about 30 people while Deutsche Bank trimmed its team of investment bankers by 2%.
More are likely to follow: Bank of America Merrill Lynch is planning to cut 17 to 18 people next week, according to a person in the bank.
However some business models seems to be weathering the storm better than others, or have already cut their costs to fit the revenue opportunity. UBS investment banking chief, Andrea Orcel was in Singapore recently for an executive committee meeting and voiced cautious optimism to staff during a town hall, according to a person at the Swiss bank.
Goldman was third equal with Morgan Stanley and Deutsche Bank in terms of first half revenues including corporate finance and trading across the Asia Pacific region, the same ranking as a year earlier, according to data provider Coalition.
In the core investment banking division, M&A and capital raising, Goldman ranked third, down from the top slot a year ago, Coalition said.
Goldman is also dealing with The New York State Department of Financial Services' investigation into its capital raising for controversial state fund, 1MDB, although the person said the scandal in Malaysia was not a motive for the layoffs. Goldman had already laid people off in Southeast Asia last year due to falling revenues across the industry in the region.
Additional reporting by Ray Chan