BNP's big Asia hiring plan too much, too late
Headcount at BNP Paribas' corporate and investment bank (CIB) is a changeable affair. In 2011, the bank cut 1,400 CIB jobs. Today, the French bank said it wants to hire 1,400 people over the next three years - all of them in the Asia Pacific region. On the back of this investment, BNP intends to increase its Asia Pac revenues by 50%, from €2bn to €3bn by 2016.
This might be a worthwhile endeavour - if Asia were a growth region. However, as we've noted in the past, investment banks' Asian revenues are stalling. Citigroup's investment banking revenues in Asia fell 1% last year. Figures from Dealogic show that combined fees earned from M&A, equity capital markets and debt capital markets deals by banks in Asia have been in decline since 2010, since which time they've fallen nearly 20%.
"It seems to me that BNP is about two years too late with this one," said Charles Geisst, a former banker who is now a finance professor at Manhattan College. "They're simply following other banks and taking too much time about it. You could almost use them as a counter-indicator."
Most investment banks expanded in Asia immediately after the financial crisis. In 2009, for example, Credit Suisse, Goldman Sachs, Morgan Stanley and JPMorgan all strengthened their Asian presence. In 2010, Barclays declared it was hiring in Asia with the intention of becoming a top three player in Asian equity capital markets, corporate broking, prime services and equities by 2015.
This week, Barclays said it had given up on its plan to become a full service investment bank in Asia. 15% of Barclays' Asian investment bankers are being made redundant. Credit Suisse, Goldman Sachs, Morgan Stanley, Deutsche Bank and Citigroup have also been paring back their Asian headcount.
BNP Paribas is swimming against the tide.
BNP declined to comment on the viability of its Asian plans. In its defence, BNP's Asian aspirations aren't about investment banking pure and simple: they focus on corporate banking and fixed income sales and trading. Moreover, JPMorgan has also identified corporate banking as a growth area in Asia. However, Citigroup's Asian corporate banking revenues look as moribund as its investment banking revenues on the continent: combined Asian securities and banking revenues fell 2% at Citigroup last year.
If BNP fails to increase its footprint overseas, this won't be the first time it's struggled outside Europe. The French bank has been seeking to increase its presence in the U.S M&A market for a long while. In May 2010 it bought Hill Street Capital, a US M&A boutique in attempt to kick start its North America M&A efforts. BNP ranks 20th for US M&A deals so far in 2013 according to Dealogic. This is up from 28th in the first quarter of 2012, but it's down from 18th in both 2010 and 2011. BNP should know that throwing money at a market doesn't always guarantee success.