Goldman Sachs, the investment bank, began courting the Agricultural Bank of China five years ago in the hope of winning the mandate to help the large state bank go public last July, bringing over senior executives from New York and Hong Kong to woo AgBank officials.
“How much does it cost to bring [Goldman Sachs chief executive] Lloyd Blankfein to Beijing?” asks the head of one of the bank’s competitors rhetorically. “That is why you can never quantify the fees versus the costs of doing business in China. So much goes into winning deals that you are never reimbursed for. You can’t be too granular about the costs versus the benefits.”
Chinese equity fees now account for up to 40-50 per cent of all Asia-Pacific fees. But a growing list of banks competing for the business, Chinese leverage in browbeating banks to cut their prices, and the expense of recruiting and keeping China bankers mean that the profitability of doing business there will remain under pressure.