J.P. Morgan’s decision to put its Chinese securities joint venture up for sale is adding to mainland candidates’ growing unease about taking jobs at global banks.
The US firm wants to offload its six-year-old stake in J.P. Morgan First Capital because profits have not met expectations.
The news will make it more difficult to convince elite bankers to work for international banks on the mainland, say headhunters.
“There’s already a limited pool of candidates who meet the criteria for front-office IB jobs with JVs in China,” says Alistair Ramsbottom, managing director of Shanghai search firm The Blacklock Group.
“The JPM move is bound to make candidates even more cautious in choosing these banks. By contrast, mainland-owned banks are now seen as offering not just stable careers, but also increasing job opportunities in both China and Hong Kong,” he adds.
Foreign ownerships rules mean Western firms like Goldman Sachs, UBS, Morgan Stanley, Deutsche Bank and Credit Suisse have had to partner with local players in order to operate onshore in China.
But they hold minority stakes in their JVs and this lack of control has helped stifle their attempts to compete with Chinese banks, which are increasingly dominating mainland investment banking.
“Global banks can be tough places to work compared with their domestic counterparts because many don’t have the licences to offer a full range of services. This coupled with fierce domestic competition and downward pressures on fees makes it a difficult environment for them to compete in when it comes to hiring,” says Ramsbottom.
Chinese banks took the eight top positions for investment banking revenue in the first nine months of this year, according to Dealogic. In 2015, J.P. Morgan First Capital ranked only 17th and 35th for DCM and ECM respectively in China, according to data from the China Securities Association.
Jason Tan, a partner at search firm Carlson Harriet in Shanghai, says the “mixed” performance of global banks in China means job seekers now view them with increasing scepticism.
“No foreign securities joint venture can really claim to be successful in terms of consistently appearing towards the top of the M&A, equities and fixed-income league tables,” he says. “It’s not just JPM – Morgan Stanley, the first foreign investment bank in China, still hasn’t got a full suite of products.”
Global banks are attempting to rebuild their reputations in China, however.
J.P. Morgan may seek another local securities partner, according to media reports.
“JPM is still betting big on China, but that means having the right people on board with the right business model,” says a source in Shanghai with knowledge of the US bank.
“The first step was hiring the very respected Julia Wu from HSBC earlier this year as China head,” he adds. “The securities joint venture exit is the second step in JPM’s plan to start afresh.”
Meanwhile, Credit Suisse is considering upping its stake in its JV, Credit Suisse Founder Securities, to the maximum permissible 49% in order to capture more mainland deals.
HSBC is setting up a new securities joint venture in China. It was granted a 51% ownership share because the investment is being made through a Hong Kong-based subsidiary.
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