The third-quarter reporting season for US and European banks is finally over. If you work in banking in Hong Kong or Singapore, you may be wondering what these firms had to say about their business and hiring plans in your part of the world.
We went through transcripts of banks’ Q3 earnings calls to find comments about Asia from their CEOs and CFOs. Some of these leaders were fairly vocal about the region – in particular Tidjane Thiam at Credit Suisse, who is a longtime Asia advocate and whose firm is the only large Western bank to run APAC as a stand-alone division.
Several banks (including JP Morgan and Goldman Sachs), made only fleeting references to Asia, while others (such as Bank of America and Societe Generale) don’t appear below because their leaders didn’t mention Asia at all during their earnings calls. Here’s what you need to know.
UBS: overweight in Asian IB, hiring in China, productive in private banking
Profits at UBS’s investment bank fell 62% year-on-year globally in Q3, which chief financial officer Kirt Gardner partly blamed on the firm being “more weighted” to Asia (and Europe) than its peers. But the Asian IB fee pool was down across the industry, he added. There was better news in wealth management, where “Asia was a major contributor” to net new money inflows globally, Gardner said. As we noted in October, UBS’s Asian private bankers have also got more productive: they each managed $393m on average in Q3, a 13% year-on-year rise. Meanwhile, UBS has been hiring in China, having won approval to take a majority stake in its mainland joint venture last year, David Chin, APAC head of IB, told us in August. Gardner confirmed this during the UBS earnings call. UBS has reinvested savings it’s made from an overall reduction in staff costs into hires it’s been “making in China”, Gardner said.
Citi: huge Asian revenues, growth in wealth management
In Q3, Citi generated $4,015m in revenues from Asia – 22% of its global total and more than three times that of Goldman Sachs during the same quarter. This performance was partly driven by consumer banking, a division which enjoyed a 5% year-on-year rise in Asian revenues, CFO Mark Mason said. More specifically, there was strong growth in “underlying wealth management drivers in Asia, with 9% growth in Citigold clients and 7% growth in net new money versus last year”, he added. Citi reportedly now plans to set up a wholly-owned securities business in China next year, which may help to further cement its position as the largest US bank in Asia by revenue.
Morgan Stanley: upbeat about Asian “opportunities”, especially in wealth
Morgan Stanley’s Q3 earnings call provided few details about its plans in Asia, but the overall tone was nevertheless upbeat. CEO James Gorman mentioned his excitement about “international opportunities, particularly Asia”, while CFO Jonathan Pruzan said Asia continues to be “interesting” as investors “divert more capital” into the region. Pruzan also spoke of “opportunities in Asia” in wealth management – echoing comments from Gorman earlier this year, who said he’d like to expand in wealth in Hong Kong and Singapore. In January, Vincent Chui, Morgan Stanley’s head of wealth management in Asia, said MS wants to hire 50 relationship managers in the two cities over the next three years.
Credit Suisse: traders make losses, but Tidjane Thiam has comforting words
Credit Suisse’s Asian markets unit made a CHF34m loss last quarter, but its traders shouldn’t necessarily worry about their jobs. CEO Tidjane Thiam said having a sales and trading capability in Asia is a “core part” of the bank’s long-term strategy, and that Asian markets employees bring clients to other business lines, so they make a “very material” contribution that isn’t disclosed in CS’s results. Thiam said he is also a longtime advocate of building the securitisation function in Asia. Meanwhile, Asian IB revenues decreased 18% year-on-year in Q3, although Thiam said the market was tough for all banks and that Greater China suffered one of its lowest activity quarters for fees in the last five years. It was a different story in private banking, which generated 60% of Credit Suisse’s Asian revenues in Q3, and saw revenues rise by 13% year-on-year, excluding a one-off gain.
HSBC: Asia is a “driving force” and may avoid the worst of the job cuts
Interim HSBC CEO Noel Quinn may be culling jobs in Europe, but he described Asia as the bank’s “driving force”, which contributed 87% of adjusted profit before tax in Q3. HSBC’s global banking and markets unit (GB&M), which includes investment banking, is a key target of Quinn’s European cuts, but in Asia it enjoyed a “very strong performance”, he said. GB&M’s Q3 revenue in Asia increased 9% year-on-year, and represented more than 50% of total revenues and more than 80% of profits. Asian GB&M could also be a recipient of a “refocusing of capital” from other HSBC regions in the future, said Quinn, adding that “trade within Asia and inter-Asia trade is still a growth market”, despite the slowing Chinese economy. While Quinn didn’t say so explicitly, the implication is that Asia may be spared the worst of HSBC’s looming redundancies.
Standard Chartered: Hong Kong is ok (for now)
We’ve already reported on some of the hottest teams at Stan Chart in light of its q3 results – these include private banking, technology and financial markets. But aside from discussing particular divisions at the bank, which makes 67% of its income from Asia, CFO Andy Halford was keen to talk about Stan Chart’s prospects in Hong Kong, its largest market. Halford said the ongoing protests in the territory have not yet made a “material” impact on the bank’s business, and that North Asia (the region led by Hong Kong), enjoyed a “reasonable” Q3. But don’t get too comfortable if you work for Stan Chart in Hong Kong. Although Hong Kong has a “history of resilience”, Halford said it’s “unrealistic to think there will be no financial impact [of the civil unrest] on the economy and therefore our business there into 2020”.
Deutsche Bank: work in transaction banking or private banking
Despite sweeping job cuts globally, especially in investment banking, there were some hotspots at Deutsche Bank in Asia. In corporate cash management, transaction volumes were up 12% globally with the fastest growth coming from Asia, CFO James von Moltke said. Trade finance revenues also increased, supported by increased lending activities in Asia. A Q3 rise in private banking revenues, net new assets, and net new loans was also partly driven by Asia as DB’s wealth managers worked more closely with its investment bankers. The German firm “increased revenue generating staff by more than 10% in the last four quarters”, Moltke said, referring to private banking globally. It’s highly likely that Asian wealth headcount also increased during that period. Deutsche told us in July that it plans to recruit 100 private banking staff in the region, without providing a timescale.
Goldman Sachs: regional revenues down, possibly because of China
Goldman’s Asian revenues came to $1,053m in Q3, its worst quarterly performance since it began publishing regional figures back it in Q3 2017. The quarter was also down 13% year on year, and was 32% below Goldman’s peak (published) Asian revenues of $1,549m, which it achieved in Q1 last year.
Unhelpfully, Goldman’s earning call did not specifically explain the decline, although chief executive David Solomon singled out China’s trade dispute with the US as a “headwind” affecting market conditions in that country, where GS’s estimates for economic growth have shrunk to only around 6%.
JP Morgan: IB success not driven by Asia
Like their Goldman counterparts, JP Morgan’s top brass said virtually nothing about Asia when presenting their bank’s third quarter results. The only mention of Asia wasn’t particularly encouraging.
When asked by an analyst whether JPM’s increased wallet share in investment banking was driven by North America or Asia , CFO Jennifer Piepszak said it was “largely” the former. Still, JPM’s Asian bankers are performing well compared with their rivals in the region. The US bank topped Dealogic’s league table for APAC (international and ex-Japan) revenue by bank in the first nine months of 2019.
BNP Paribas: growth in corporate banking
Lars Machenil, the French firm’s chief financial officer, said Asian growth contributed to an 11.7% year-on-year revenue increase in corporate banking in the third quarter.
Image credit: Alexis, Unsplash
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