It may be curtains for Wall Street banks’ dominance in the Indian investment banking space after years of leadership.
On Monday, leading US banks Goldman Sachs and Morgan Stanley announced a restructuring to tone down their high-risk investment banking businesses, including fund raising for companies and advising on mergers and acquisitions. The two said they would now be banks regulated by the US Federal Reserve.
Early last week, US investment bank Merrill Lynch was bought out by the Bank of America after it incurred heavy losses in the US markets.
The move raises questions about expansion plans of US investment banks in India.
Both Goldman and Morgan have been scaling up their Indian operations through recruitments. The US firms are now likely to shelve all expansion plans.
With this, the dreams of business school graduates landing high-profile investment-banking jobs are getting gloomy. “Now, all these firms will stop hiring in India in any major way,” said an official of a domestic investment bank.
With US banks losing ground, their Japanese and European peers are fast moving in.
Japanese brokerage group Nomura Holdings is close to buying out the Asian assets of the bankrupt Lehman Brothers. This could potentially save 2,500 jobs in Lehman’s Indian operations.
“Earlier investment banking was purely US-dominated. From now on, for at least the next few years, you may not see those big names much often,” said Sudip Rungta, head (mergers and acquisitions), Essar Group. “We are going to see a structural change in the investment banking business.”