US banks transfer analysts' work to India
By David Wells in New York and Khozem Merchant in Bombay
Last Updated: August 20 2003 0:18
US investment banks are transferring work to India as they revamp equity research departments in response to the Wall Street analyst scandal and the bear market.
Advertisement
Banks including JP Morgan Chase and outsourcing companies such as Office Tiger say they are not replacing existing jobs but shifting tasks normally done by junior analysts such as number crunching to allow senior analysts the opportunity to publish reports and talk with clients.
Joydeep SenGupta, a partner at business consultancy McKinsey in New Delhi, said every big investment bank and the occassional asset management company is outsourcing some research work or at least exploring the issue.
JP Morgan Chase, which began using the research services in May, said: "Our objectives are to provide support for our existing sector teams, improve productivity and continue to differentiate the quality of our research."
Banks say the arrangement helps make expensive US-based analysts more productive, and India is ideal for outsourcing because of its education levels and lack of language barriers.
The number of jobs transferred so far is small. Nasscom, an Indian industry trade group, estimates 100 to 200 equity research jobs had been moved. This compares with thousands in information technology, software development and call centres.
The need to hire help stems in part from declining research budgets. Reseach typically was funded by equity trading revenue and investment banking revenue, both of which have slumped, and the ties between investment bankers and analysts are now closely watched by regulators after April's research settlement.
To keep costs low, JP Morgan Chase and its rivals are asking analysts to cover more companies and sectors. Hiring support staff for them in India is another method of keeping budgets trim because salaries are much lower.
Alan Johnson, a New York-based compensation consultant said a US employee with an MBA going for an analyst position could make between $100,000 and $145,000 and a college graduate could receive about $65,000. In Mumbai, an MBA can expect about $25,000 and other employees might make half that. Real estate and employee benefit costs are also much cheaper in India.
Success with outsourcing information technology, software development and call centre jobs - Nasscom says US banks saved between $6bn and $8bn in the four years to 2002 in such areas - is leading to partnerships covering more complex work.
news.ft.com |
