Are BEA’s mass sackings just the tip of the iceberg for Hong Kong?
City’s stuttering economy and technological revolution in financial industry could mean more jobs will go
Hong Kong lender Bank of East Asia Ltd announced on Thursday it would reduce the size of its brokerage operations in the city, cutting 180 jobs, or 3.8 per cent of its workforce, to reduce costs and consolidate operations amid a downturn in trading volumes on the local stock exchange.
One economist warned the lay-offs were a symptom of the deepening economic malaise affecting the financial sector, and that more staff cuts were in the offing from other companies in the days ahead.
“This is just the beginning. We will see more local banks follow suit,” Citic Ka Wah Bank chief economist Liao Qun said. Liao added that the layoffs had been triggered by the weakening economy and the rapid development of financial technology automation, or fintech.
Hong Kong’s economy grew 0.8 per cent in the first quarter on year, its slowest pace of growth in four years, down from 1.93 per cent in the fourth quarter of 2015. Turnover on the Hong Kong stock exchange during the first quarter is down 23 per cent on year.
“The securities brokerage business in Hong Kong is quite challenged today,” said Brett McGonnegal, chairman of Capital Link International, “Volumes are down and the fintech revolution is in full force ... the result will be that the industry will no longer be able to support brick and mortar outlets as the costs will overrun profits.”
BEA said the cuts will affect headcount at its brokerage business, East Asia Securities. The bank said it conducted a review of its operations in light of falling profit and decided to push increased automation in an effort to contain costs. BEA’s profit last year dropped by 17 per cent.
East Asia Securities will close all of its 22 retail outlets in Hong Kong by July 8, but will continue to provide telephone and internet banking services to customers, which already facilitate over 90 per cent of transactions.
David Li Kwok-po, BEA chairman and chief executive, said in a letter to staff that BEA had decided to cancel or remove a number of out-of-date and repetitive procedures and structures, so as to reallocate these resources to more value-added areas, according to reports in local media.
BEA has been making a push to become a leading player in digital banking in Hong Kong. It plans to transform its 90 branches into Hong Kong to a digital model by 2018.
Other banks in the city said they have no plans to cut back on staff.
“At our investor update we said we expected an overall reduction in headcount at HSBC Group worldwide, but we do not expect any net headcount reduction in Hong Kong, where we continue to invest and build out our Pearl River Delta business,” said Gareth Hewett, a spokesman for HSBC.
A recent stress test of 13 Hong Kong banks, including BEA, carried out by Fitch Ratings, concluded that they were well prepared to withstand challenges from a downturn in the credit cycle due to their sound capital positions and earnings buffers.