Finance

Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

With the exception perhaps of Goldman Sachs Group Inc., first-quarter earnings at U.S. banks are booming, powered by gains in fixed-income trading. But if you think that's cause for celebration among job seekers in Asia, you'd be wrong. Beyond digital banking, the region's hiring thermometer is set to deep freeze.

It's a reflection of the broader slowdown in investment banking, which as well as stock, fixed-income, currencies and commodities trading, includes equity capital markets, debt capital markets and M&A. According to data from industry researcher Coalition, corporate and investment banking revenue in Asia Pacific slid 7 percent last year, with higher trading income offset by a slump in equities broking, IPO underwriting and deal advisory.

Banking Blues
Overall investment and corporate banking revenue in Asia Pacific slid last year, even as fixed income, currencies and commodities trading rose
Source: Coalition
Note: Coalition data covers Bank of America, Barclays, BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Societe Generale and UBS.

While declines in prop trading since the global financial crisis are partly to blame for the reduced headcount in FICC, the rise in algorithmic trading is also responsible. Computer programs can execute thousands of stock trades in seconds. On top of that, several European banks like Barclays Plc have retreated in key businesses, and new share sales have slowed, leading Goldman Sachs alone to lay off about 30 bankers from the region last year, mainly in Singapore and Hong Kong.

The Great Taper
Headcount at investment banks in the region has been declining
Source: Coalition
Note: Headcount refers to front office staff numbers at investment banks in the region in trading, ECM, DCM and M&A. Companies surveyed include Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Societe Generale and UBS. Figures for 2016 are first half only.

While Asia contributed $3.3 billion, or about 20 percent, of revenue for Citigroup Inc. in the three months through March 31, much of the excitement was outside investment banking. Treasury, trade and consumer were the real highlights, thanks in part to an increase in online payments made via credit cards linked to apps such as Uber and Grab.

Unless a career at a Chinese bank appeals, being tech-savvy, or content with a role sans the excitement of a trading floor, is the way to go. But even then, banks from the mainland have been criticized for their low pay and red tape, which sort of takes the fun out of merchant banking. More stimulation can be had at fledgling investment funds, or private equity firms, for example.

It's also worth remembering that despite all the reams of newsprint dedicated to China, Asia remains one of the smallest parts of most Western banks' businesses. Goldman Sachs's Deputy Chief Financial Officer Marty Chavez, outlining the lender's first-quarter earnings, noted that Asia accounts for about 15 percent of the total versus 60 percent for the U.S. and 25 percent for Europe.

So not only is corporate and investment banking in Asia a shrinking pool that's part of a much larger pond, it's boring to boot. Brush up on your digital skills or go elsewhere. That seems to be the message.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Much of the fixed income, currencies and commodities gains came from an increase in trading of Japanese yen bonds. A rise in emerging-market note trading should help supplement that this year.

To contact the author of this story:
Nisha Gopalan in Hong Kong at ngopalan3@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net