PRIVATE BANKING

Morgan Stanley lays off private bankers

Several senior figures lose their jobs as weak investment market and intense competition force the global giant to make tough decisions

PUBLISHED : Wednesday, 07 November, 2012, 12:00am
UPDATED : Thursday, 08 November, 2012, 4:36pm

Morgan Stanley this week laid off several private bankers, including one vice-president and some associates and analysts.

The bank joins several of its peers in Hong Kong that have been firing private bankers, in a year marked by weak markets, dwindling client appetite for investment and trading, and intense competition.

Julius Baer and Goldman Sachs are among others that have also laid off staff recently. Morgan Stanley declined to comment.

For private banks to maintain a profitable business, each relationship manager needs to attract and maintain at least US$150 million in assets to manage, according to Kenny Lam, a McKinsey partner who specialises in private banking.

Individuals who fail to bring in enough assets to manage often face the risk of being laid off after performance reviews, which are usually conducted on a semi-annual or annual basis.

The dismal investment environment in Hong Kong, which has led to much lower than usual trading activity, and the fragmented market - exacerbated by increasing competition from new players - have made this year especially difficult for private banks.

"The market slowed down considerably compared to last year. Trading revenue has reduced substantially. Market outlook remains uncertain and banks are taking a cautious approach to reduce cost-income ratio," Jerry Chang, a director of recruitment firm Barons & Company, said.

Lam said: "Costs remain high while revenues have dropped. Profit margins are down to the lowest point in the past five years, based on our estimates."

Even so, private banks are seeking access to rising wealth on the mainland through their base in Hong Kong. In doing so, some have been looking for talent.

The mainland is estimated to contribute over half of the revenue growth for Asia's private banking business. In terms of the number of high-net-worth individuals, 40 per cent are located in the Pearl River Delta, 31 per cent in the Yangtze River Delta and 11 per cent in the Bohai region, according to a report by McKinsey.

It expects the number of high-net-worth individuals with investable assets of more than 10 million yuan (HK$12.3 million) and those with more 100 million yuan to grow by about 20 per cent a year up to 2015 on the mainland.

 

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