BROKER Wardley James Capel (Far East) is on the verge of being split up by its owner, Hongkong Bank parent HSBC Holdings, just two years after it was formed from the merger of Wardley-Thomson and James Capel. The break-up, confirmed by James Capel, will see institutional sales and research operations hived off into a new company, James Capel Asia. Retail broking will be handled separately by Wardley Financial Services. News of the proposed changes, believed to have left some employees unhappy, follows a visit to Hong Kong last week by Bernard Asher, the London-based chairman of HSBC's investment banking. The split will affect neither the London operations nor the broker's activities in mainland China, which will remain a single entity. John Seto, Wardley James Capel chief executive, will head up the Wardley operations. The new James Capel chief has not yet been announced. Peter Letley, deputy chairman of James Capel in London, denied the merger had been a failure and said it had not been a costly exercise. ''We got out of it what we wanted to get out of it,'' he said. ''We originally put the two together because we felt we could achieve certain things. ''We have achieved the results we wanted and we now want to run the institutional business as a global product through James Capel. ''We see it as an internal reorganisation. What we're doing is saying there is an institutional base and a retail base and they do require different products.'' The two brokers joined forces in January 1992, six months before HSBC's takeover of the Midland Bank. The deal brought together the Hong Kong arm of London institutional broker James Capel - bought by HSBC in 1986 - and the largely retail-driven broking side of Wardley, HSBC's Asian merchant bank. The reasoning behind the move was that the two businesses were overlapping and beginning to compete with each other for institutional clients in Asian countries outside Hong Kong. However some analysts at the time felt the merger was aimed at solving problems at James Capel - a factor denied by the parties. The broker had lost money here in previous years and was losing staff as well. Marrying the pair's contrasting styles did not come easy in the aftermath. Many former Wardley equity analysts left the new firm, including five - led by Kirk Sweeney - who were head-hunted by rival broker Lehman Brothers. The entire James Capel group made a pre-tax profit of GBP7.5 million last year, down from a restated GBP17.6 million after restructuring and other charges. Wardley James Capel contributed ''strong profits''.