HONG KONG, July 4 (Reuters) - BNP Paribas SA will source the bulk of its Asia Pacific equity research from independent research provider Morningstar Inc, the French bank said on Thursday, as investment banks seek to cut costs after regulatory changes.
Under the pact with Morningstar, BNP will source research coverage for about 150 company stocks, across six industrial sectors, listed in China, Hong Kong, Singapore, South Korea, and Taiwan, the bank said in a statement.
The bulk of BNP’s in-house equities research team, mainly in Hong Kong and Singapore, will depart as a result of the pact and the bank will retain roughly half a dozen senior industrial sector specialists, a person familiar with the matter said.
A BNP spokesman in Hong Kong declined to comment on possible headcount changes.
BNP’s total stock coverage in the region, as a result of the partnership, will be around 330 company stocks, including those listed in India where it will continue to undertake equity research in-house, the bank said.
Asset managers have become less willing to pay as much for stock-picking research following the European Union’s Markets in Financial Instruments Directive II (MiFID II), which unbundled fees. It has forced some investment banks to scale back or outsource their coverage of companies.
“With recent changes in regulatory and market conditions, banks have sought to adapt their sell-side cash equity research models, while continuing to meet clients’ needs,” the French bank said in the statement.
In February, BNP Paribas announced plans to cut 350 million euros ($394.94 million) in costs from the corporate and investment bank after a weak fourth quarter.
Independent research coverage is gaining popularity amid the regulatory-driven shake-up.
In December 2016, Societe Generale announced a tie-up with Singapore-based Smartkarma, in a first of its kind partnership in Asia at the time, to provide third-party Asian equity research to its institutional clients. ($1 = 0.8862 euros) (Reporting by Sumeet Chatterjee; Editing by Muralikumar Anantharaman)