Merrill Lynch, UBS and JPMorgan & Chase are telling senior bankers in Asia to fly economy on short-haul flights and reduce non-essential travel as they step up cost cuts, officials at the firms said.
UBS advised bankers this month to travel economy class for flights of up to five hours, two officials at the biggest Swiss bank said, asking not to be identified because it’s an internal policy. Merrill employees have been told to travel economy for flights of as much as three hours since mid-September, two executives at the firm said.
The world’s largest banks and securities firms are trimming costs to survive the credit-market meltdown that toppled Lehman Brothers and forced Merrill Lynch to sell itself to Bank of America. The financial-services industry has cut more than 140,000 jobs since a surge in subprime mortgage delinquencies began to roil global debt markets in 2007.
”Investment banking has almost disappeared in this market, and with revenue shrinking severely, it’s sensible to cut every single type of cost they can,” said Renault Kam, a senior portfolio manager at Atlantis Investment Management in Hong Kong. ”We haven’t seen the worst yet.”
JPMorgan, the biggest US bank, has requested senior bankers fly economy on flights less than three hours since late August, said an official who declined to be identified.
Fly cheaper, less
Royal Bank of Scotland, which ceded majority control to the UK government this month, in an October 16 memo asked workers worldwide to fly economy on regional routes and to cut back on travel, said an RBS banker who’s seen the document. RBS spokesman Hui Yukmin didn’t return a call seeing comment.
HSBC’s Asia unit asked its Hong Kong department heads and branch managers to cut travel expenses by 15% to 20% next year, two officials at the bank said, citing a September 23 memo sent by Chief Operating Officer Jon Addis.
HSBC is recommending China Eastern Airlines, the country’s third-biggest carrier, over Hong Kong Dragon Airlines for business trips to Shanghai, the memo said, according to the people. Europe’s biggest bank by market value cut 1,100 jobs in its global banking and markets division last month.
A round-trip business class ticket from Hong Kong to Shanghai with Dragonair costs $HK6,110 ($1,156) excluding tax, almost double the best coach fare. An economy class traveler at China Eastern pays $HK2,650.
Airlines are feeling the pinch. Cathay Pacific Airways, Dragonair’s parent, on October 13 reported the first drop in traffic in 20 months and said demand out of Hong Kong “slowed significantly” as the credit crisis damped business travel.
Singapore Airlines, the world’s biggest carrier by market value, also recorded declines in traffic.
Mergers and acquisitions worldwide have fallen 30% to $3.6 trillion this year from the same period in 2007, according to data compiled by Bloomberg. Global equity offerings fared even worse, slumping by half to $US292 billion.
Pain from the worst US financial crisis since the Great Depression is spreading into Asia as stocks tumble and companies cancel acquisitions, stake sales and equity offerings.
Samsung Electronics, the world’s second-largest chipmaker, today scrapped a $US5.85 billion unsolicited bid for SanDisk Corp. This month, Huawei Technologies canceled a plan to sell a stake in its handset unit, and Ping An Insurance ended an agreement to buy Fortis’s asset-management arm. Hong Kong’s PCCW shelved a plan last week to sell a stake in its main unit because offers fell short of expectations.
Merrill job cuts
UBS was forced into a $US59.2 billion government bailout last week and Merrill, following its emergency sale to Bank of America last month, plans to cut about 500 jobs in its trading division, three people with knowledge of the plan said on Oct. 21.
About 75 of those positions will be in Asia, said a bank official who declined to be identified.
“UBS always seeks to control its costs,” said Chris Cockerill, a Hong Kong-based spokesman at the firm. “In the current financial environment we are reviewing all potential areas where greater savings can be made, and travel is one of them.” He declined to elaborate.
Rob Stewart, a Hong Kong-based spokesman at Merrill, declined to comment.
London-based HSBC has asked its bankers to use video conferencing to replace business trips when possible. Travelers for corporate training or internal meetings are required to book economy seats, spokesman Gareth Hewett said.