JPMorgan accelerates senior relocations from Hong Kong to Shanghai
JPMorgan has accelerated plans to relocate some of its top investment bankers in Hong Kong to mainland China as draconian pandemic restrictions have made travelling from the territory to meet clients almost impossible.
The Wall Street bank has also run an analysis on how to make “overnight relocations” of key staff from Hong Kong to Singapore in recent weeks as part of contingency plans for a full shutdown of markets in the Chinese territory, which is suffering its worst outbreak of coronavirus.
JPMorgan is the latest international lender in Hong Kong to plan for significant changes to its regional operations as more than two years of restrictions on travel have led to an exodus of workers, concerns about operational problems and questions about its future as a global financial centre.
Hong Kong’s “fly in, fly out model is currently broken”, said an executive close to JPMorgan. “Having bankers in Hong Kong to cover mainland China clients doesn’t make sense.”
The bank will speed up an expansion of its mainland investment bank to mitigate the travel problems in Hong Kong by relocating a small number of top dealmakers to Shanghai, according to the executive and another person close to the matter. Currently, executives travelling from Hong Kong to mainland China have to undergo a two or three-week quarantine on both legs of their trip.
Although it was the first Wall Street lender to be granted approval to run a wholly-owned investment bank in mainland China last August, JPMorgan has been slower to expand its onshore business than its rivals. It currently has just two senior dealmakers in China but will relocate around three more from Hong Kong in the short-term, the executive added.
A series of executives have relocated from Hong Kong to Singapore, London, Australia and the US in recent months as the territory has further tightened restrictions on socialising, closed schools and announced plans for citywide compulsory testing of its 7.5mn residents.
There has been a net outflow of more than 100,000 people since the beginning of February. Some expatriate executives have fled citing fears about being separated from their children due to Hong Kong’s coronavirus isolation policies.
Bank of America launched a review led by its chief operating officer into potential relocations from Hong Kong to Singapore in January. Banks, including Goldman Sachs and JPMorgan, have allowed workers who have requested to leave Hong Kong to move on a case-by-case basis.
JPMorgan’s latest “operational resilience” exercise included working out how many people it would immediately move to Singapore in the event of a two-week shutdown in Hong Kong, including staff whose roles involve settlement of trades. It is one of a large number of scenarios the bank has prepared for, the executive said.
Hong Kong has not said it would close its markets, but companies and residents have been gripped by uncertainty over a potential lockdown as cases have surged in one month from around 4 in 100,000 people to 547 — an increase in daily average cases of 12,000 per cent.
Hong Kong’s banking regulator has told global finance firms it has started lobbying the government to reduce quarantine times for travellers entering the city as it struggles to maintain confidence in the Asia finance hub.
JPMorgan said: “We constantly evaluate our business resiliency in every market where we operate. China is part of our long term growth strategy in the region. We have 100 per cent ownership of our securities company in China and we will continue to invest in it, including additional headcount.”
Hong Kong is not the only city where the lender is shrinking its footprint. On Thursday, JPMorgan announced that it is pulling out of Russia, relocating some staff and suspending any new business in the country in response to the invasion of Ukraine.