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UBS bankers in Hong Kong will find jobs “very quickly” if they leave after IPO ban

UBS bankers in Hong Kong wanting to leave the firm in the wake of its 18-month suspension from sponsoring initial public offerings will be in high demand at rival banks. The Securities and Futures Commission (SFC) has imposed the ban on UBS and fined it HK$119m in relation to an undisclosed IPO that it has been investigating. The Swiss firm is appealing the rulings.

“The top IPO bankers at UBS will probably wait for these further hearings to take place, but I expect some junior to mid-level bankers to consider making an exit sooner,” says investment banking recruiter Jason Tan, an associate director at Kelly Services.

Those that do leave will likely be snapped up by other banks as Hong Kong prepares for a series of potential blockbuster Chinese tech listings in 2018 that could see total flotations in the city rival their 2010 record. “These UBS bankers will find a job very quickly,” says Tan. “My recent conversations with ECM bankers in Hong Kong and China suggest that there will be a surge in ECM recruitment soon, now that Chinese New Year is over.”

UBS has traditionally been one of Hong Kong’s leading sponsors of IPOs, sponsoring 10% of all companies that have listed on the city’s main board over the past decade, according to Dealogic. This share fell to 3% in 2016 and 2% in 2017, however, following SFC investigations into some of its listings.

The skills of UBS bankers will be in “high demand when the next influx of HK IPOs comes”, says Yvette Kwan, a former APAC investment banking COO at UBS, now a partner at Hong Kong consultancy Quinlan & Associates. “UBS has historically been very strong in HK IPOs, with strong technical knowledge of the listing rules and deep IPO execution experience.”

Chinese banks, which now dominant Hong Kong listings, are likely destinations for departing UBS bankers, says Tan. Led by China Merchants Bank and CICC, seven mainland firms made the top-10 banks for underwriting Hong Kong IPO deals in 2017, according to Bloomberg. “We’ve already seen this talent flow to Chinese banks in the last few years,” says Kwan. “Their bankers are often already well connected with the Chinese companies that they are helping to list in HK.”

Morgan Stanley and Credit Suisse – the leading Western institutions on the IPO table, in sixth and ninth places respectively – may also try to tap UBS bankers.

The extent of any departures from UBS depends on how badly its Hong Kong IPO business is affected by the ban over the coming months, say industry experts. Andrea Orcel and David Chin, global and Asia Pacific heads of UBS’s investment bank respectively, have told employees in a memo that it is “business as normal” until the bank’s appeal is heard, which is likely to be in the fourth quarter. UBS can continue to underwrite IPOs, a service which generates much higher fees than sponsorship alone.

Still, sponsor banks are typically also appointed in the lucrative role of lead underwriters, so the SFC suspension could diminish UBS’s underwriting income just as rivals look to cash in on Hong Kong’s buoyant 2018 IPO pipeline. The 18-month ban is also longer than the six months many bankers in Hong Kong expected, reports Reuters.

“There are underwriting roles beyond sponsor available to UBS,” says former UBS COO Kwan. “Nonetheless, the news is a big blow to current and prospective clients’ perceptions about the ability of UBS to execute for them, regardless of whether or not any appeal to the suspension and fine is successful. So there will be a lot of communicating with clients to placate them.”

“UBS can still underwrite, so it will try to find a way to utilise its ECM team effectively,” adds Stanley Soh, a Hong Kong-based regional country director of financial services solutions. “But as UBS is in the appeal process, there could be a negative effect on client retention and origination moving forward.”

In the long-term, and beyond ECM, the SFC ruling is unlikely to impact recruitment and retention at UBS in Asia. “The UBS brand remains strong in Asia – this is not like the financial crisis or the princelings hiring scandal,” says Tan. “I think UBS will bounce back strongly as it has been investing heavily in Greater China and its relationships here remain solid.”

Image credit: NanoStockk, Getty

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AUTHORSimon Mortlock Content Manager

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