Goldman feels the heat in Asia as IPO engine slows

Fri Sep 30, 2016 12:59am EDT
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By Denny Thomas and Sumeet Chatterjee

HONG KONG (Reuters) - Goldman Sachs failed to make it to the upper echelon of Asia's equity market fee earners for the first time in more than a decade, hit by a squeeze in fees that is prompting the U.S. bank to cut back jobs in the region.

Goldman has shared dominance of the Asia Pacific equity capital market arena with UBS and Morgan Stanley since clinching the mandate for China's first privatization in 1997.

But increased competition from Chinese rivals and a dearth of the blockbuster deals it has previously relied on to make money in Asia are putting pressure on global investment banking powerhouses such as Goldman, quarterly Thomson Reuters data shows.

"The value, the opportunity in the market has vaporized," said Keith Pogson, EY Asia Pacific financial services senior partner. "You cannot sustain a big-hitting team with seven-figure salaries if you are not going to hit the ball out of the stadium."

IPO activity in Asia Pacific fell 13.2 percent in the first nine months of the year to the weakest level since 2013.

While maintaining its leadership in terms of volumes in M&A advisory in Asia Pacific, excluding Japan, Goldman slipped to No. 4 in the equity capital market (ECM) Thomson Reuters league table in the first nine months of the year, from first in 2015.

The New York-based bank saw a 73 percent slump in the volume of Asia Pacific ECM deals it worked on, the sharpest fall among the top 10 equity underwriters in the region, closely followed by UBS with a 71 percent tumble.

China's CITIC Securities Co Ltd clinched the top slot in the ECM rankings, followed by Morgan Stanley and UBS.   Continued...

A sign is displayed in the reception of the Sydney offices of Goldman Sachs in Australia, May 18, 2016. REUTERS/David Gray/File Photo