January 7, 2016 / 8:31 AM / 3 years ago

European banks set for more job cuts in Asian equities as China meltdown hits profits

* Barclays, BNP Paribas, Deutsche likely to cut jobs
-sources
    * Barclays likely to add to S.Korea, Taiwan cuts -sources
    * China slowdown, local competition hurting bank profits
    * Midsize players in Asia equities trim non-core markets

    By Lawrence White and Sumeet Chatterjee
    HONG KONG/MUMBAI, Jan 7 (Reuters) - European banks are set
to trim more jobs in Asian equities, industry insiders said, as
global cost-cutting reaches peripheral businesses in a region
where a drop in Chinese trading volumes and local competition
have hit profits.
    Bankers and headhunters told Reuters that BNP Paribas SA
, Deutsche Bank AG and Barclays PLC 
are among lenders likely to cut back equities trading and
research teams in non-core markets in Asia this year.
    The mooted cuts set the tone for a tough 2016. Already this
year, turmoil in Chinese stocks has clouded the picture for
brokers trying to drum up business in key commission-paying
markets, as unpredictable central bank and regulatory action
sent shares tumbling and triggered trading halts. 
    "We continue to see banks assessing profitability of
businesses in Asia," said Paul McSheaffrey, head of Hong Kong
banking at KPMG.
    Weaker revenue and tighter regulations have dulled returns
in the Asia equities business, McSheaffrey said, with the result
that some lenders will trim operations in non-essential markets.
    "Banks have to assess what is core to their customer
franchise and shape their footprint accordingly," he said.
    In markets such as India, home-grown rivals have cornered a
bigger share of the domestic business and offer broader research
services afforded by lower costs, bankers said.
    Raja Lahiri, partner at consultancy Grant Thornton India in
Mumbai, said there was "definitely pressure on the equities
business" as falling fees made competing in overcrowded markets
less attractive.
    Barclays is already set to close investment banking
businesses in South Korea and Taiwan, sources told Reuters.
Standard Chartered PLC and Societe Generale,
have also shut equities platforms or cut headcount. 
 
    Deutsche Bank, BNP Paribas and Barclays declined to comment
on staffing issues. Industry insiders that spoke to Reuters
declined to be identified due to the sensitivity of the issue.
    
    FOCUS ON RETURNS
    With 10 of Europe's biggest lenders announcing 130,000 job
losses since June, bank chief executives are looking to cut in
businesses where they lack scale to focus on more profitable
markets. 
    "The overall focus is on returns and if you look at the
equities business in Asia the profitability is not that high,"
said a senior equities banker with a large European bank.
    "The size of the pie hasn't changed and with the United
States raising interest rates, it will gradually shrink," the
banker said. "So the focus is on large markets like the U.S."
    Mid-ranked equities players such as Barclays and StanChart
expanded Asian equities platforms, including stock-broking and
research, after the 2008 financial crisis, expecting strong
economic growth would lead to booming stock markets.
    That boom never came, and offering research and broking
across each of Asia's fragmented markets has become expensive at
a time when the focus for big investors is increasingly Hong
Kong and the world's second-biggest economy, China.
    Those two markets accounted for 54 percent of Asia broker
commissions last year, from 46 percent a year earlier, according
to researcher Greenwich Associates.
    But industry insiders said a grim China outlook this year
means there is unlikely to be a repeat of last year's trading
bonanza, when the benchmark Shanghai-Shenzhen CSI 300 index
 climbed 46 percent in January-June before tumbling 43
percent by August.
    "In a prolonged bear market people trade once then walk
away," said a Hong Kong-based equities recruiter. "There's no
money to be made for banks."

 (Reporting by Lawrence White and Sumeet Chatterjee; Additional
reporting by Umesh Desai and Anjuli Davies; Editing by
Christopher Cushing)
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