Executives at Credit Suisse First Boston were yesterday preparing to fire up to 160 staff across the region in the latest in a wave of cutbacks by investment banks struggling to turn a profit amid plunging markets and evaporating deal flows. Goldman Sachs is also to lay off some staff in the region as part of the US financial giant's plan to globally trim 250 employees in its investment banking division. The banks are not only reducing costs by cutting the headcount of their highly paid staff. Morgan Stanley is understood to be moving to switch top-tier managers from expatriate deals with housing and school allowances to the lump-sum packages locally hired staff are given. The intensifying moves to cut costs by the investment banks is helping to drive down rents in Hong Kong's luxury housing markets, according to property agents. Staff at CSFB's Hong Kong office learnt that their jobs were in danger from a circular email sent by chief executive John Mack which arrived in mid-morning. It said that 5 to 7 per cent of the bank's 25,000 global staff would have to go, given that underwriting fees for the industry had fallen 45 per cent in the third quarter from the second and global merger deals were down 37 per cent this year against last. 'Eliminating jobs is never easy, but it is especially difficult when people have been working so hard . . . unfortunately in this environment, to be competitive, we simply have no alternative,' wrote Mr Mack. He said he was aiming to save US$500 million in staff costs, implying the average salary of the people to be elimated was US$285,000. CSFB is understood to employ 2,300 people in the region including Japan and Australia with about 500 of them based in Hong Kong. The process of selecting lay-off candidates and paying them out is expected to be completed by the end of the month. An insider tried to put on a brave face saying: 'There will definitely be more blood on the carpet but there is speculation that Asia will be less impacted [than other regions] because of its lower cost base.' The cuts by CSFB and Goldman follow reports that JPMorgan is eliminating one in five of its 20,000 investment bankers globally and Merrill Lynch was planning to fire 2,000 staff. Top executives at the investment banks are now having to make tough decisions about Asia, a region which has never produced more than intermittent profits for a handful of firms, according to Emmanuel Pitsilis, a partner and head of investment banking practice at consultancy McKinsey. 'I wouldn't be able to name any investment bank that has been consistently profitable in Asia in the last 10 years,' he said. The choice was either to cut staff to the bone so costs go in line with revenues or continue taking losses in the hope that the investment in promising markets, particularly Taiwan, China and Korea, would pay off long term. There are estimated to be between 1,000 and 1,500 investment bankers working in the region on average annual packages of US$1 million. That makes costs of up to US$1.5 billion, yet revenues from their activities only generate an estimated US$500 million to US$750 million. Earlier hopes that markets would bounce back in the second half of this year were now gone, meaning that top executives were now more likely to take 'drastic decisions', said Mr Pitsilis. The cost-cutting in the investment banking industry is being reflected in Hong Kong's luxury property market. Leading bankers are housed in flats which rent from HK$50,000 to HK$120,000 per month in upmarket areas such as The Peak, Mid-Levels, Repulse Bay and Tai Tam. Many banks were now switching from company leases on luxury flats to include a banker's housing allowance in his salary, said Josephine Chu, associate director for residential services at CB Richard Ellis. A Morgan Stanley spokesman was unable to comment yesterday on rumours that its senior expatriate staff were being switched to local deals. Goldman Sachs is understood to have cut its expatriate housing allowance by 10 per cent but a spokesman said there were no plans for large lay-offs in Asia.