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One reason why Goldman’s Asian bankers may still be (slightly) envious of Citi’s

If you work for Goldman Sachs in Asia, you might not have enjoyed the best quarter of your career in Q2.

Goldman’s Asian revenues came to $1,120m in the second quarter, its second worst three-month performance since it began publishing regional figures back it in Q3 2017. The quarter was also down 1% year on year, and was 28% below Goldman’s peak (published) Asian revenues of $1,549m, which it achieved in Q1 last year.

What explains the fall? As always, Goldman’s financial report says nothing about its Asian business apart from providing the raw revenue numbers. But new figures from Dealogic suggest the blame lies with its investment bank in ex-Japan Asia.

Goldman fell from first to fifth position year on year for IB revenues in that region in the first half of 2019, below CITIC, Credit Suisse, Morgan Stanley, and JP Morgan, according to the data provider. More specifically, it lost the top position in ECM (it’s now third) and fell two places to fifth in M&A.

While the bank’s Asian earnings figures and league table positions are far from disastrous, they do suggest that it has been treading water in the region. Goldman faces increasing competition in Asia from Chinese banks that now dominate DCM deal making and are a growing force in ECM. Meanwhile, Western rivals such as UBS and JP Morgan have received Chinese regulatory approval for majority-controlled securities joint ventures that will help them expand on the mainland.

The size of Goldman’s Asian revenues was brought into perspective by another US bank that reported on Monday: Citi. While Goldman made $1,120m (12% of its global revenues) in Q2, Citi generated $4,003m (21%).

This was not a one-off, as shown in the chart below, which compares Asian income at the two US firms stretching back to Q3 2017.

As the size of its results suggests, Citi is a universal bank in Asia, where it has some 50,000 staff across 16 markets. Citi’s global consumer banking unit employs people in stable cash-cow functions that Goldman has little or no Asian presence in (e.g. cards and retail banking).

Strip out consumer banking, however, and the figures tell a slightly different story. Citi’s other division in Asia, Institutional Clients Group (ICG), comprises corporate and investment banking, treasury and trade solutions, markets and securities services, and private banking – and it therefore competes in similar sectors to Goldman. ICG in Asia made $2,008m in the first quarter. That’s still a 79% increase over Goldman’s overall Asian total, but Citi is a whopping 257% ahead of GS when its entire regional revenues are included.

Image credit: Nils Versemann

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AUTHORSimon Mortlock Content Manager

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