Hong Kong banking sector likely to escape global job cuts

Emphasis on client-facing functions means financial services recruitment remains solid in the city, say analysts

PUBLISHED : Thursday, 04 August, 2016, 8:37pm
UPDATED : Thursday, 04 August, 2016, 11:02pm

Globally, cost cutting by banks seems set to continue, but Hong Kong looks likely to miss the worst of it according to experts.

On Wednesday, HSBC chief executive Stuart Gulliver said the lender was on track to reach its target of as much as US$5 billion in cost savings by 2017, adding that further savings might be necessary in 2018 and 2019.

Standard Chartered, in its half yearly interim statement, also said it was on track to deliver gross cost efficiencies in excess of US $1 billion this year.

“Around the world, banks are focussed on cutting costs, but this is not particularly doom laden for Hong Kong,” said Keith Pogson, EY senior partner, Asia-Pacific financial services.

“A large proportion of jobs at the big banks here are client facing as the banks have already outsourced a lot of their mundane tasks to shared service centres overseas. It is those jobs that have already been outsourced that are particularly vulnerable to robotics and cost consolidation.

“Also, Hong Kong’s slow take up of financial technology means that at the moment, jobs here are not particularly under threat.”

It’s hard to see anywhere else where financial services recruitment is going better than in Hong Kong
John Mullally, director financial services at Robert Walters

Three major lenders in Hong Kong reported sharp falls in their first-half profits on Wednesday.

HSBC, the city’s biggest, said pre-tax profit dropped 29 per cent to US$9.71 billion, its subsidiary Hang Seng Bank said net profit slumped 60 per cent, while Standard Chartered said pre-tax profit plunged 46 per cent to US$994 million.

Globally, compliance-related costs are rising and with revenue growth under pressure, costs remain an important factor for profitability.

Speaking ahead of those three sets of results being released, Sherry Zhang, a banking analyst at Moody’s, said the one thing she would be looking out for from their statements was how the banks planned to overcome asset quality pressure or mitigate profitability problems.

In Hong Kong, in particular, she said there are concerns about declining GDP growth, “which will translate through to poorer asset quality, while fee income is down from the first half of last year because of the more sluggish markets”.

But while banks in Hong Kong may avoid the worst of cost cutting related redundancies, the slow environment is still having an effect on staffing.

“The hiring environment in the bank sector has been very slow in Hong Kong this year,” said John Mullally, director financial services at recruitment firm Robert Walters in the city.

“Banks have been selectively letting people go and those leaving are not being replaced, but we haven’t seen many big lay offs,” said Mullally.

“Relatively speaking, Hong Kong is doing better than other major financial services centre, certainly in comparison with London, and it’s hard to see anywhere else where financial services recruitment is going better than in Hong Kong.”