By Alex Frew McMillan and Michael Flaherty
January 10, 2012 8:58 AM EST
(REUTERS) -- Bank of America-Merrill Lynch, the second-largest U.S. bank by assets, is cutting around a fifth of its managing directors across its Asia investment banking division, sources said on Monday, in a bid to cut costs as the outlook sours in a once-booming region.
Foreign banks in Asia stepped up their cost cutting in the latter part of last year and are now moving up the experience chain to prune positions and units seen as too expensive in the current environment.
Some 15 of BofA's 75 Asia managing directors in that unit will be gone by end-March through early retirement, transfer or the standard pink slip, according to three sources with direct knowledge of the matter. Among the departures is managing director Michael Cho, a veteran Merrill Lynch Asia M&A banker.
Headhunters interviewed by Reuters said the bank's reduction in its ranks of managing directors in Asia was a deeper-than-usual cull of senior bankers, but reflects the broad challenges the investment banking industry faces.
"That sounds like carnage," said Richard Broadhurst, who runs Hong Kong-based Initiative Recruitment.
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Cho was the co-head of mergers and acquisitions in Asia ex-Japan, Australia and India and was appointed to the role in May 2009. His departure would represent one of the most senior Asia Pacific investment bankers to leave his post since the region wide cuts began in the fall.
Dow Jones first reported Cho's departure on Monday.
Cho could not immediately be reached for comment. Cho's co-head, Zhang Xiuping, will remain with BofA, the source said.
In a unique move, BofA is putting some of its analysts and associates - typically the youngest and newest members of a bank - into a general pool rather than assign them to a specific team, the sources said. This would allow the bank to set these younger bankers to any urgent and fee-producing work for any part of the business, rather than have them wait for their unit to see better demand.
Managing director is the top title attained at most investment banks, and in good years guarantees pay of $1-$3 million, including bonus. The title is earned for years of hard work or a shorter period of significant fee in-take.
But in leaner times or during a business restructuring or repositioning, MDs are targeted as the most expensive employees and the quickest way to reduce a significant cost. MDs who are not directly involved with client relationships that bring in revenue are usually the first to go.
BofA began its round of investment banking cuts in Asia on Monday, said the sources, who did not want to be identified as they were not authorised to speak publicly about the matter.
The move is consistent with what BofA is doing globally as it aims to streamline the corporate and investment banking businesses and reduce costs wherever it can. The cost cutting initiative, known as "New BAC", targets the reduction of 30,000 jobs, the bank has previously disclosed.
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