Morgan Stanley this week laid off several people in its private banking department in Hong Kong, including one vice-president and some associates and analysts.
The bank joins several of its peers in the city that have been cutting back on staff in this area 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.
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 to income ratio," said Jerry Chang, a director of recruitment firm Barons & Company.
Kenny Lam, a McKinsey partner who specialises in private banking, 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, banks are seeking access to rising wealth on the mainland through bases in Hong Kong. In doing so, some banks, including DBS, Bank of Singapore and Credit Suisse, have been looking for talent.
The mainland is estimated to contribute over 50 per cent in 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 delta and 11 per cent in the Bohai region, according to a report by McKinsey.
The global management consulting firm expects the number of high-net-worth individuals with investable assets of more than 10 million yuan (HK$12.3 million) and ultra-high-net-worth individuals with investable assets of more 100 million yuan to grow by about 20 per cent a year up to 2015 on the mainland.