Parvati Banati has left Deutsche Bank, where she was head of southeast Asia investment banking. Deutsche has not commented her departure, but a Singapore-based headhunter said plummeting volumes in the region were likely to have been factors in the decision.
“This is not specific to Deutsche of course," said the headhunter. "The industry is slowing down because investment banking isn’t so appealing anymore.”
Southeast Asia, once the darling of investors, has been a drag on recent performance, with announced M&A volumes for the top 10 banks in the year-to-date period slipping to $98.70bn versus $108.26bn a year ago, according to Dealogic.
DCM volumes dropped to $37.46bn from $39.52bn, while ECM fared slightly better, rising to $8.57bn from $7.67bn. Net revenues for M&A, ECM, DCM and loans business in the region fell to $259m, against $298m in the January to August period last year.
Deutsche has certainly not been immune to the slump. A plunge in M&A and DCM volumes has halved its net southeast Asian investment banking revenues so far this year, compared to the same period in 2014.
The headhunter said there was talk of more senior bankers in Singapore making their exits soon, especially at banks where there have been shake-ups at a global level. “But it won’t create too much of a ripple," the headhunter added. "In this market no one is indispensable.”
Farida Charania, Asia Pacific CEO of search firm Nastrac Group, said that hiring in Singapore-based banks had decreased markedly over the past six months. One area where this has been pronounced is in origination talent, given that fewer deals need brokering.
“The dealmaking scene is not dead but there are people already on the bench," Charania said. "Things are likely to remain status quo, with most of the hiring needs expected to be rolled over into next year. People are waiting and watching. It has stopped raining but the floor is still wet.”
The purge
It is a sign of the times, said a second Singapore-based headhunter. The year started off on a bad note, with 15 departures from Goldman Sachs' Singapore office, he said. “Global banks have been shedding people not just at the junior level but also directors too.”
Stanley Teo, director at Profile Search & Selection Singapore, said that few banks in Singapore were planning to add new staff, given the slowdown in activity across ECM and M&A. There could be more downsizing before the end of the year, he said, given current volumes.
However, not everyone is crumbling under the pressure. A number of Asian banks, Teo pointed out, are making good in this environment. “They are picking up the slack in global capital markets and making full use of their relationships in the region and balance sheet.”
Foreign banks, meanwhile, are feeling the squeeze to tighten headcount in a bid to manage costs, he added. Recruiters said they had seen this knee-jerk reaction before, with a similar culling turning the industry on its head during the 2000 and 2008 financial crises.
But firms are keeping their coverage banker teams largely intact because of their ability to generate business, said Teo. Those in execution, and especially on ECM and M&A desks, may find themselves in a more vulnerable position, headhunters said.
As prospects in banking dwindle, former executives will seek opportunities elsewhere. Recruiters said Temasek, the Singaporean sovereign fund, is an attractive choice. “They are always looking to hire and have snagged some very solid bankers in recent years,” one headhunter said.
Other high-profile moves this year include the appointment of Loh Boon Chye, formerly the Asia Pacific global markets head and country executive for Singapore and southeast Asia for Bank of America Merrill Lynch, as the new CEO of the Singapore Exchange.
The second headhunter reckoned that if business remained flat, banks could start another round of retrenchments. “They will do a third quarter review and announce changes by October. The cuts could be made before the end of the year and before bonuses are paid out.”
Profile Search’s Teo noted that hiring for front-office positions in M&A and capital markets surged in 2014. “This year the opposite has happened. Headcount freezes and cuts have taken over instead. Hiring volumes may drop 20% for investment banking and M&A jobs.”
Desperate times, desperate measures
Bankers themselves are no more sanguine. A regional head of ECM syndicate based in Singapore agreed with Teo that there could be more job cuts to come. The entire southeast Asia is going through a digestive phase, he said.
“Some of our junior staff have left and we don’t plan to replace them. Last year was decent and even then we saw people leaving. This year the first half was bad and it looks like things won’t get any better in the second half, so expect banks to be hit by more layoffs.”
Bankers themselves express puzzlement at how volumes have vanished. “This isn’t a normal summer as we don’t have a mountain of deals waiting when we come back," said a head of southeast Asia ECM. “The pipeline has fizzled out and I don’t know when they’re coming back.”
Business is so poor that the global banks are making a beeline for smaller issuers. “I met a corporate last week and he told me a bulge bracket had seen him last week with the same proposal, and another international bank the week before,” the head of ECM syndicate said.
The slowdown is forcing banks to change tack, with the head of ECM saying he was now following fewer situations but tracking each one more closely. “I’m no less busy or leaving the office early. A slow market means we just have to double down.”
But a head of southeast Asia ECM at a bulge bracket firm struck an optimistic tone, saying that although investors were selective on the region, they remained constructive. “There’s no rush for them participate in deals and they won’t play every issue,” he said.
“We’re committed to the region through thick and thin,” the head of southeast Asia ECM added. “This low issuance environment is a short-term hiccup, and not a long-term reflection of ECM. It can’t go on forever.”