Investment banks are tired of China – Kommersant

At the end of last year, most of the world’s leading investment banks significantly worsened their results from doing business in China. Experts attribute this to the tightening of regulation in China, as well as to unpredictable and tough decisions to contain the pandemic and the growth of geopolitical tensions in relations between the United States and China. Against this background, some banks refuse to expand their operations in China, while others are ready for their partial reduction.

Leading investment banks in Europe and the US posted losses or shrinking profits in their Chinese divisions last year. According to The Financial Times, which analyzed bank statements, American Goldman Sachs, British HSBC, Swiss Credit Suisse and German Deutsche Bank suffered losses in China, while American Morgan Stanley’s profits declined. The only major investment banks whose profits from Chinese operations grew in 2022 were the US JPMorgan and the Swiss UBS.

Profits of investment banks fall amid tightening market regulation by the current Chinese leadership, including financial sphere.

One of the main sources of income was commissions from the placement of securities of Chinese companies on American and European exchanges and servicing their operations in Western markets, but this business has declined markedly due to increased tensions between China and the United States, started even under President Donald Trump. As a result, the Chinese and American authorities tightened rules for the placement and listing of Chinese companies in the United States. And last year, the business climate and economic dynamics in China were hit hard. lockdowns.

As a result, according to the agency Bloomberg, leading investment banks are forced to reconsider their plans in China. Goldman Sachs has already cut its forecasts for Chinese operations over the next five years. Morgan Stanley has put on hold a project to build a full-fledged brokerage unit in mainland China, opting to focus on more modest futures and derivatives operations for the time being. In addition, according to agency sources, Morgan Stanley plans to reduce the staff of its investment banking units in the Asia-Pacific region by 7%. Previously became known and JPMorgan’s plans to cut its investment banking staff in Asia, including in China.

However, despite the deterioration of the situation in China and the reduction of operations, global investment banks are not going to completely leave this market.

“They have already established themselves there,” the FT quoted an unnamed senior banker as saying. “Getting licenses and hiring people again is very expensive. Therefore, they are unlikely to want to completely leave there.”

Evgeniy Khvostik