200 Ex-I Bankers

Bad Second Half

Ankush Sharma (name changed) was sacked in the usual style of his profession. An investment banker in a global bank, he reported to work like every other day, during the course of which he was asked to report to the boardroom for what he thought was a routine meeting. He was handed his severance cheque, and while he was away from his desk, his computer was locked so as to disable any transfer of data. He left in the next half an hour.Sharma is a part of what’s building up to be a wave of layoffs and restructuring in investment banking in India. The trend picked up in the second half of 2011. And this may be the first time such a major culling is happening in I-banking in India.The 2008 subprime crisis didn’t result in too many layoffs in Indian operations of global investment banks and they were largely driven by closures at large US banks. Sonal Agrawal, CEO of executive search firm Accord India, says, “In 2009, the domestic economy was not affected as much. Given slowdown in India, it’s structurally different now and more severe.”How bad is the situation in I-banking now? Industry sources say across all major banks and at all levels, the total number of investment bankers laid off in India would be considerably more than 200. Of the majors, UBS Credit Suisse and Goldman Sachs are implementing restructuring plans. More layoffs are expected soon.“The restructuring has been 90% at the junior and 10% at senior levels. Bonuses this year are also predicted by markets to be 25-30% lower,” says Puneet Pratap Singh, partner, financial services at global executive search firm Heidrick and Struggles.Kotak Mahindra promoter Uday Kotak said in a recent interview to Bloomberg that the money that I-banks are making now no longer justifies the number of employees or their salaries. The industry has 20-40% excess capacity and there is correction underway, Kotak had observed.After poor second-quarter results in 2011, banks like Nomura and Credit Suisse announced plans to restructure costs and cut staff across operations. According to a Nomura spokesperson, “at the time of its second quarter results, Nomura announced its intention to reduce its cost run rate by $1.2 billion, and we are in the process of executing that plan as quickly as possible”.People familiar with Nomura’s internal operations said around 100 people have been laid off in the wholesale banking division in the bank’s backend Powai, Mumbai office. Nomura denied this figure. The bank said job losses amount to only around 2% of its employees in India.In the first half of 2011, many deals in the capital market and the mergers and acquisitions field were concluded. Around 80% of the total Rs 25,000-crore capital market fund mobilisation was raised in the first half. In both business activities, deals in India were far fewer in the second half of 2011.“While there were many inbound and outbound deals in the first half of 2011, the second half of 2011 was tough for M&As because valuations came down and there was significant market volatility,” says Raj Balakrishnan, head of Mergers and Acquisitions, Bank of America Merrill Lynch