HSBC joined the long list of banks reducing their wealth management staff this week when it cut 100 positions in its private banking business in Hong Kong. The layoffs amount to 8% of HSBC Private Bank's 1,200 staff in Hong Kong.
"Changing market conditions have affected business volumes and have led private banking to review its business to ensure it remains competitive and well-placed to serve its clients," says Vinh Tran, a spokesman for HSBC.
The layoffs are across levels, from assistant administrators to managing directors, say sources, and encompass both front-office and back-office staff.
While HSBC's private bank made a profit of $1.4 billion last year and managed $352 billion for clients, the unit's profits in Hong Kong fell 22% to $237 million. And with both assets under management and product sales continuing to drop, it's not entirely surprising that HSBC is trying to pare costs to enable it to weather what looks set to be a difficult year, say specialists.
HSBC is not alone in facing challenges in private banking. Yesterday, while declaring earnings for the first quarter of 2009, Morgan Stanley said wealth management revenues fell 20% over the same quarter last year due to lower asset management and transactional revenues. "Lower asset management revenues reflected a decline in client asset levels; lower transactional revenues primarily reflected reduced levels of market activity and a decline in underwriting revenues," said Morgan Stanley in its earnings release.
And given the market conditions, such cutbacks are becoming part of a larger trend in private banking. Starting in November, Citi fired around 150 people from its wealth management unit in Asia excluding Japan as part of a global restructuring in which it cut 52,000 jobs. In December, when Credit Suisse said it would cut 5,300 jobs, folks in private banking were not spared.
On April 14, UBS Wealth Management said it was getting rid of approximately 240 jobs in the Asia-Pacific region. That amounts to about 7.5% of UBS's wealth management staff in Asia-Pacific, or about 3% of UBS's employees out here.
In February, Deutsche Bank let go of roughly 60 people from its private wealth management team, across Hong Kong and Singapore. And in March, Societe Generale cut just shy of 10% of its Asia (excluding Japan) private banking staff.
However, there is also a bit of swings and roundabouts going on. In December, Citi appointed Debashish Gupta as head of capital markets for Citi's global wealth management and global consumer group businesses in the Asia-Pacific (ex-Japan) region. Gupta re-joined Citi from Lehman Brothers. Deutsche Bank has also hired amidst the firings; it has added five senior private bankers since the beginning of 2009, most recently snagging Wayne Yang from Merrill Lynch in early April to fill a newly created role as head of its key clients group for Southeast Asia. And Julius Baer has been hiring staff -- its most recent announcement was that it had hired two senior relationship managers in Singapore from Goldman Sachs and UBS as it expands its business.
But most of the industry news has been about retrenchment. And for good reason. According to a survey released earlier this week by Barclays Capital, Asia's leading wealth managers expect revenues will be down over the next two years. In last year's survey, around 90% of wealth managers expected revenue growth in Asia of more than 5% per annum in the coming two years, while in this year's survey, only 41% of respondents expect such growth. Worse still, this year 18% anticipate negative returns.
As for HSBC as a whole, the bank said last month it was cutting 6,100 jobs and closing most of its US consumer lending businesses after announcing a decline in 2008 profit and a £12.5 billion ($17.7 billion) rights issue (net of expenses) to replenish capital. Last November, HSBC cut 500 jobs in Asia, of which 450 were based in Hong Kong.
But despite what's been happening across the industry and at HSBC specifically, the extent of the job cuts in private banking still came as a surprise to those affected, say specialists. And there is no certainty that this is the end.