Piyush Gupta, chief executive officer of Singaporean bank DBS coined the phrase. Thanks to a lot of ill-thought out expansion under his predecessors, DBS had ended up with a lot of, “hobby businesses,” he explained when the bank announced its results this week. At DBS, these were especially in the UK, the US and the Middle East. Under Gupta, the bank has retrenched and is focusing on Asia.
It’s the same story elsewhere. As Reuters BreakingViews editor Peter Thal Larsen wrote after Davos, the big news now is the de-globalisation of finance.
On one hand, de-globalisation means reduced international capital flows. On the other, it means retrenching to core markets.
Hence, BNP Paribas and SocGen are cutting overseas businesses and pulling back to France, RBS is cutting businesses in Spain, Italy, Russia, the Nordic region and the Middle East, to leave an operation focused on London, Paris and Frankfurt. Macquarie is closing its German-based structured products unit. And Barclays said today that some of the additional £800m in cost savings it now intends to achieve before 2013 will come from, “rationalizing locations across the business.”
The implication is clear: if you want to keep your job in banking, now and in the future, you need to be working in a key location, not in a marginal region that can be ignored altogether or covered remotely.
Being in a geographical hub alone will not be sufficient to ensure your career survival. Having located yourself in a hub, you need to be in a scale business with determination to succeed – not in a dilletantish whimsy.
Hence BarCap insisted this morning that its equities business performed comparatively well (revenues were down 15% year-on-year) because it has successfully captured client flows. Equally, having flung itself wholeheartedly into M&A recruitment in 2009 and 2010, it has been rewarded with a 20% market share in UK M&A.
RBS, meanwhile, hired a little less enthusiastically, hasn’t managed to achieve scale in either equities or M&A, and is today making 300 redundancies in equities and ECM ahead of its March 23rd deadline for selling the business.
Which are these hobby businesses? These figures (click here) from JPMorgan last year indicate the bit-players in each business area. Note that French banks don’t look good. Nomura doesn’t feature.
The final rule is to ensure you are not doing anything that is being duplicated anywhere else within your organisation.
If you are a coverage banker, you do not want to be covering markets or clients covered by another colleague in another team. If so, you could be displaced. Credit Suisse, for example is taking costs out by de-layering its European coverage business.
Equally, if you are a support professional in IT, HR, or finance, make sure you are working in a role that is product specific and not generic. Citigroup, Deutsche and Barclays are among the universal banks focused on rationalization of their support structures to save money. Any generic roles are being de-duplicated. The more specific you can be, the better.