Goldman Sachs has been pondering Asian job cuts for several months – back in June we predicted that more lay-offs were coming in the second half of 2016.
Now they’ve arrived – but the size of the cull has stunned the banking sector in Singapore and Hong Kong, and opened up a new avenue for Chinese banks to hire top talent.
Goldman is trimming the number of M&A, ECM and DCM bankers in ex-Japan Asia from about 300 to just over 200 – a reduction of nearly 30% – reports Reuters.
A few details of the redundancies are now starting to emerge, although our sources say not all the affected bankers have been informed yet.
“Some of the senior guys have already been given the heads-up, but not the rest of them,” says a recruiter in Singapore with knowledge of the US firm.
The lay-offs will be shared primarily among Hong Kong, Singapore and China. “The word is that Singapore will have fewer cuts in absolute numbers compared with Hong Kong, but proportionately the cuts will be bigger in Singapore because far fewer GS bankers are based in Singapore to begin with,” says the Singapore recruiter.
The cuts will primarily affect Goldman’s senior ranks. “This makes sense because these days banks here need execution ability, not expensive mature bankers – client relationships in Asia are becoming more institutionalised,” says an investment banking headhunter in Hong Kong.
M&A will bear the brunt of the redundancies, says another headhunter who works with Goldman Sachs in Hong Kong.
While Goldman still ranks highly in Asian M&A league tables, the overall value of Asia Pacific M&A deals has fallen to $572.9bn so far this year, from $745.7bn in the same period in 2015, according to Thomson Reuters data.
Asian clients have retained their traditional reluctance to pay for advisory, and now – as mainland companies increasingly expand overseas – Chinese banks are winning a larger slice of Asian M&A work by offering lower fees than their Western rivals.
Chinese banks ready to pouce
How will ex-Goldman bankers fare in the job market?
“Global investment banks in Asia aren’t hiring very much and won’t be taking them on in mass – it will just be cherry picking,” says the IB headhunter. “An MD at another big US bank in Hong Kong has told me that unless the GS people can bring immediate revenue he’s not interested – they’d just be a cost base that would affect his team’s bonuses.”
Former Goldman bankers will also be competing against candidates who've lost their jobs amid a series of smaller-scale cuts at other international banks in Asia this year. In the latest example, Bank of America is reportedly trimming about two dozen investment banking roles in Hong Kong, Singapore and Japan.
As we noted earlier this month, however, mainland firms with an investment banking wing in Hong Kong – including BOCI, China Securities, CICC, CITIC Securities, GF Securities, Guotai Junan Securities, Haitong Securities and ICBC – are continuing to recruit.
“They will be very interested in the GS people,” says the IB headhunter in Hong Kong. “These are Goldman bankers after all – of much higher than average quality. There’s huge kudos in having them on board. I wouldn’t be surprised if one of the Chinese banks went for a big swoop and took on a lot of them.”
But will they want to move? Lower base pay at mainland banks and differences in corporate culture suggest the transition would not be straightforward.
“If you’re laid off in this market and you decide to stay in financial services, you have to go where the options are, and that means the Chinese banks” says the headhunter. “It was the same when the global banks laid off people during the financial crisis. And in the SARs crisis back in 2002, BOCI was able to pick up a lot of bankers from the globals,” says the headhunter.
Chinese companies – who have been increasingly hiring investment bankers into corporate development jobs in recent months – are another likely destination for some of the Goldmanites.
Goldman Sachs bankers have shown a particular interest in moving to mainland technology giants.
The bank did not respond to a request for comment.
Image credit: Chris Ryan, Getty