HONG KONG/PARIS (Reuters) - BNP Paribas (BNPP.PA) will source the bulk of its Asia Pacific equity research from independent research provider Morningstar Inc (MORN.O), a move which two people said will lead to about a dozen jobs being cut at the French bank.
Independent research coverage is gaining popularity in major markets as global investment banks are seeking to cut costs amid a regulatory-driven shakeup that is forcing banks and brokers to charge fund managers for equity research.
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.
About 12 analysts in BNP’s in-house equities research team in Hong Kong and Singapore will depart as a result of the pact, said the two people, who have direct knowledge of the matter. They declined to be named as the deal details were not public.
The bank will retain roughly half a dozen industrial sector specialists, one person said, adding that Manishi Raychaudhuri, head of equity research Asia Pacific, and regional head of property research Wee Liat Lee are among those who will stay.
A BNP spokesman in Hong Kong declined to comment on what the sources said or on any 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 January, 2018 rollout of the European Union’s Markets in Financial Instruments Directive II (MiFID II), which unbundled fees.
Before MiFID II, banks and brokerages in Europe bundled the cost of research into overall charges for executing customer trades, or gave it away free. The change has forced some 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.
In December 2016, Societe Generale (SOGN.PA) 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.
Reporting by Sumeet Chatterjee in Hong Kong and Inti Landauro in Paris; Editing by Muralikumar Anantharaman