With endless reports of job cuts and scaled back investment banking operations across the world, many seeking employment in finance’s elite segment have many reasons to be pessimistic. Roland Berger Strategy recently reported that another 40,000 positions would need to be slashed in order for the industry to return to profitability. Declining merger and acquisition activity has taken away investment banking’s cash cow, and left the industry in a downward spiral. While some institutions have shifted focus to fixed income or corporate finance activities that are showing more robust revenues, the profitability from the high profile activities simply just isn’t there with the more pedestrian bond trades.
Despite the doom and gloom, there is one particular market that is showing stronger than average results. Roland Berger Strategy is suggesting that, while further consolidation will still occur in this geography, South-East Asia will be a hotspot for growth in the coming years. While the growth will still be led by fixed income trading, other investment banking activities are expected to remain stronger in countries such as Malaysia and Singapore than in North American or European markets. Emerging markets are still experiencing robust economic growth overall, which leads to additional IPO and merger and acquisition activity.
Investment Banking Finding Stability Rather than Turnaround
While the news from South-East Asia is certainly encouraging, the growth is certainly not what was seen in the past globally. Roland Berger describes the situation as “more a stabilization than a turnout,” and suggests that banks “shouldn’t rely on further growth in the near term, but rather focus on creating higher profits out of a flat revenue pool.” And any growth will certainly come from fixed income activities rather than equity or merger and acquisition work.
Opportunities in Islamic Finance encouraging for South-East Asia
One interesting niche market being exploited in South-East Asia is the Islamic finance market. Traditionally dominated by players in the Middle East, Malaysia in particular is taking a growing role in satisfying the demand for this unique form of finance. With strong banks and local expertise, banks in Islamic countries in the region have the ability to operate in a segment that typically provides higher margins in exchange for the specialized knowledge required to execute such a transaction.
What Does This Mean for Investment Banking Job Seekers?
The investment banking industry continues to support those willing to seize upon opportunity, regardless of where or how that opportunity comes about. Overall, the outlook is quite poor for investment banking, especially in traditional North American and European markets. However, there are certainly segments of the market that do offer opportunities for those willing to move outside of their comfort zone and perhaps relocate to a country with more a most robust economic outlook. Certainly countries like Malaysia and Singapore offer first world amenities alongside more diverse employment opportunity.
Much like in western markets, those with fixed income experience and knowledge are certainly at an advantage as this segment takes up a greater proportion of global investment banking revenues. Islamic finance is another unique area of experience that may provide and advantage for those seeking employment in South-East Asia.