Two Global Banks Leap at Opportunities in Emerging Markets, While Competitors Pull Back Stakes.

[ by Melanie Gretchen ]

Goldman Sachs and JPMorgan Chase are bucking the trend of their rival banks.  Rather than reduce capacity, both bank leaders are pursuing expansion, according to Goldman President Gary Cohn, who cites Goldman's expansion throughout Brazil, as an example.

Mr. Cohn, 52, is surprised by the current moves by his firm's competitors, noting:  "You’re seeing big international banks, outside of ourselves and JPMorgan, really taking a pretty substantial step back from the markets, and we hadn’t seen that in the entire history of banking."

So, Where Are Other Banks Making Cuts?  The following large global banks epitomize the industry direction:

• UBS AG and Credit Suisse Group AG.:   Both are:  (i) cutting risk-weighted assets, (ii) reducing balance sheets, and (iii) withdrawing from certain markets and regions after suffering losses during the credit crisis.

• Deutsche Bank AG:  reducing balance-sheet leverage.

• Barclays Plc:  restricting activity under U.K. regulation.

A Changed Landscape. All this is creating a new landscape, where major international banks are stepping out, while stronger local banks are filling the gaps - as in Brazil, Singapore, Japan, and Hong Kong.  Previously strong markets include France, Spain, Italy, and Portugal. 

As far as Goldman's expansion in Brazil, here are some aspects of the firm's recent plans:

• hiring this year to fill at least 50 new positions in Brazil  - adding to private-wealth management and hiring bankers with knowledge of, and connections with, local states;
• expanding investment banking coverage to 300  companies, from 200; 
• establishing a new office in Sao Paulo, staffed with "well over" 300 full-time workers in the country;
• last year, doubled equity capital in Brazil to $400 million, with a target of $1 billion under management;
• assigning new co-heads of investment banking in Brazil - Fabio Bicudo and Antonio Pereira, - following the retirement of Daniel Wainstein

[Bloomberg, 4/3/13]

To contact Melanie Gretchen: melanie@compliance-insights.com.