According to Reuters, Goldman Sachs Group, Inc. (GS - Analyst Report) has plans to cut nearly 30% of its 300 investment banking workforce in Asia, outside of Japan. This will be effective primarily in the bank’s main Asian offices, including Hong Kong, Singapore and China.
Affected employees would comprise bankers working on mergers and acquisitions (M&A), and equity and debt capital market deals.
Per a source with knowledge of the matter, one of the main reasons behind this job cut is reducing deals in the region. Also, growing investment banks in mainland China have been hurting profits and market share of the western banks. This, in turn, has been providing fierce competition to the western banks.
According to a Reuters report, the total value of M&A in Asia has plummeted around 23.2% this year to $573 billion.
Goldman has been facing its worst Asia ranking in equity issuance since 2008. Further, in July this year, the bank’s CFO announced cost-cutting initiatives, which would save $700 million a year. The bank’s investment banking revenues fell 11% year over year in the last reported quarter.
The Overall Scenario
Global investment banking firms have been under pressure to curb costs primarily due to the recent regulatory oversight.
In Jun 2016, Goldman retrenched employees in its investment banking division in London, New York and Hong Kong. This was done in the wake of reduced deals, along with a slump in profits. The positions included managing directors, executive directors and vice presidents in the mergers and debt and equity capital market units.
Further, in Aug 2016, the bank announced its plan to eliminate 15 additional jobs by the end of 2016 in the New York investment banking unit.
Barclays PLC (BCS - Analyst Report) declared in January that it would trim nearly 1,000 positions in its investment bank operations worldwide, with major reductions in Asia.
Morgan Stanley (MS - Analyst Report) is also slashing staff at its fixed income division. Additionally, many other major foreign companies, including Credit Suisse Group AG (CS - Snapshot Report) and Deutsche Bank AG , are reducing their workforce.
Goldman’s stock declined around 1.7% in the last trading session to close at $165.13. Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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