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Goldman Sachs' Asia issues highlighted by Citi & Morgan Stanley

The re-opening of China benefited Citi and Morgan Stanley during the first quarter, but Goldman Sachs admitted it's been slow to build its wealth business in the APAC region

Much of the focus around earnings this week was around how the recent banking crisis affected deposits in the US, but bank CEOs also gave an update on their APAC businesses and how they are navigating geopolitical and market turmoil in the region.

Corporate finance revenues remain at cyclical lows given a drought in equity capital markets and mergers and acquisition activity, but trading and other businesses showed improvements. 

Morgan Stanley CEO James Gorman said that the bank's Asia business showed “strength in areas of both fixed income and equities, aided by the policy dynamics in Japan and the China reopening”, as the bank delivered its third highest quarter ever. Morgan Stanley doesn’t break down regional performance by business, but overall group revenues dropped 2% to $1.9bn in the three months to March 31. The US bank benefits from a strong Japanese business thanks to its venture with MUFG, giving it an edge over its closest rivals.

Citi’s CEO Jane Fraser was also positive on Asia. She agreed that “the reopening of China is adding to the momentum in the region”. Citi’s institutional clients group (ICG) posted a 6% rise in revenues in Asia to $2.3bn, while profits rose 8% to $782m.  ICG is broader than pure investment banking.  As well as Citi’s capital markets and advisory business it includes two other business – markets and services, which includes treasury and trade solutions (TTS). TTS has been earmarked by CEO Jane Fraser as a big area for expansion.

Fraser said that TTS had generated more cross-border activity as trade blocs realign. “We have to keep a close eye on geopolitics as the U.S.-China relationship becomes increasingly strained and is fragmenting economic blocks,” she said on the bank’s earnings call.

Citi's focus in Asia is now on building out its personal banking and wealth management division, which posted a 20% rise in revenues in the first quarter. Fraser hinted at further hires in wealth management, adding that that Citi sees “a lot of potential of growth in Asia as we fill in the coverage across the full wealth spectrum there.”

Of the US banks that provide a breakdown of revenues in Asia, Goldman appears to be faring the worst. The bank’s revenues in Asia fell to $1.4bn from $1.7bn a year ago, although it didn’t say which parts of the business were worst affected.

Goldman, however, was less bullish on Asia than its rivals, particularly when it comes to wealth. When asked about the potential for taking private banking clients from Credit Suisse following its acquisition from UBS, CEO David Solomon said: “We haven’t been as focused on growth and investment in Asia as we have been in Europe over the course of the last couple of years. We did launch a private wealth joint venture over in Asia over the course of the last couple of months with ICBC, which I think is a small and slow opportunity, but is an opportunity for us.”

Goldman was also among the first to cut jobs in Asian investment banking, slashing headcount in its China business.  Across the region it suffered departures of experienced traders to hedge funds which are rapidly expanding as China re-opens. Alexis Tsang, who was named co-head of Greater China equities sales less than a year ago and has joined Millennium Capital Management along with Jig Patel, who quit as Goldman’s chief operating officer of Asia Pacific prime services.

These are the latest departures from Goldman’s Asia equities business that has seen five long-serving executives leave in the last year including Canute Dalmasse, who the firm’s co-head of equities distribution and execution for Asia-Pacific who retired in January.

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AUTHORDavid Rothnie Insider Comment

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