For many fresh graduates in Singapore, investment banking still holds the allure of huge financial gains and the glamour of helping CEOs and CFOs with their listings and mergers.
When I started my investment banking career some 14 years ago, it was certainly exciting working in Singapore. The high point was from 2006 to 2008 when a lot of Chinese companies were listing here – it was an IPO gold rush.
Fast forward to 2017 and investment banking in Singapore isn’t an attractive area to work in. In many ways I think it’s past its prime in this region. Take Southeast Asia M&A volume: it stood at $27.2bn in the first half of this year, down 32% from H1 2016 and the lowest half-year volume since 2012.
And listings, especially, have suffered a lot in Singapore compared with when I joined the industry – we no longer have a steady stream of IPOs. Chinese firms are exiting the SGX and generally prefer to list in Hong Kong.
Looking ahead, it’s hard to see where there will be major areas of future growth in Singapore investment banking. On top of my country’s particular issues, big investment banks are under huge cost pressure across the world.
These local and global problems mean IBs like mine are axing jobs in Singapore this year. No roles appear safe and banks seem to be considering cuts almost on a rolling basis. Investment banks are getting costlier to run, especially because of the Basel III capital charge. And I also see a future cost threat from fintech companies, which don’t have the burden of operating under Basel.
At the moment banks have two main advantages over fintechs: capital and client trust. But fintechs are already gathering capital and it’s only a matter of time before more customers will start trusting them to provide more complex banking services.
As I see it, the pressure to cut costs (and downsize teams) is only set to continue, both in Singapore and globally. If you work in investment banking this means you need to perform well to stay above the fray, so it’s not you who’s axed next. This may sound bleak – but it’s just how it is.
Here in Singapore corporate banking probably has a far brighter future than investment banking, although every function in a large firm carries its own risks. Relationship managers, for example, are constantly under personal revenue pressure.
If I were a young person now thinking about a long-term career in financial services, I would actually avoid big banks completely. I’d join or start a fintech firm instead.
If you’re thinking seriously about your future career mobility, why would you want to start out by joining a dinosaur (i.e. a bank)? Of course a fintech career also comes with risks and you won’t get a big base salary to begin with. But the potential future rewards of getting an early foothold in an important emerging industry are huge.
Unfortunately for me, a career change would be difficult. I’m going to try to stay in investment banking – not because I love the work but because I’m stuck in the sector. I’ve become reliant on a large, steady income and the spending power it gives me. That’s a hard thing to suddenly give up if your bank hasn’t given you the chop (yet).
There are still some good things in my job – like the moment of finally bringing a company to listing after nine months of due diligence. But to be honest, it’s 99% about the money.
So I will try to keep chugging along. In five years’ time, however, I may not be in investment banking – not out of choice but because my job will no longer exist.
Harvey Wu (we have used a pseudonym to protect his identity) works for a large global investment bank in Singapore.
Image credit: JGalione