SHANGHAI (Reuters) - China International Capital Corp ( CNICF ) may reduce its investment banking headcount by at least 10% this year, two people with knowledge of the matter said, as a capital market downturn and sluggish economy darken prospects.

Beijing-based CICC, which had about 2,400 investment banking staff at the end of 2023, is considering cuts among its dealmakers at home and offshore within the year, the people said.

CICC is also considering downsizing its onshore investment banking by one-third between 2024 and 2026, with an annual turnover rate of about 13%, one of the people said. The move would mainly affect investment banking staff in mega cities such as Beijing, Shanghai and Shenzhen, added the person.

The intention to cut headcount has been communicated to several bankers from their managers or the Human Resources department, but the bank has made no internal announcements of its plan, the people said.

Both people declined to be identified because they are not authorised to speak to the media.

The reductions would include underperformers who are pushed to resign and staff who agree to quit after the recent pay cut, the sources said.

CICC declined to comment.

The cuts would be the first major workforce reductions this year at a top Chinese investment bank, and would rank among Chinese banks' biggest layoffs since the end of COVID, as China's economic slowdown, rising Sino-U.S. tensions and sluggish capital markets have dampened dealmaking.

CICC, China's oldest investment bank, is under increased pressure to rein in costs amid rapidly falling fees from its underwriting and financial advisory businesses.

The bank reported worse-than-expected earnings in the first quarter this year, with revenue down 38% and net profit dropping 45% year-on-year, as per its quarterly report.

Its investment banking business, traditionally a main revenue contributor, posted a 25% drop in net income over the same period, the report showed. Analysts said the business was primarily dragged down by muted initial public offerings and other equity transactions amid China's tightened scrutiny of new listings.

CICC had already been cutting the base pay of onshore dealmakers by as much as 25%, Reuters reported last month.

Total proceeds raised via IPOs in mainland China plunged nearly 90% to $2.6 billion for the first four months of the year, the lowest since 2013, according to LSEG data.

Hong Kong, once the world's top listing venue, only saw 15 IPOs raise $996 million over the same period this year, a drop of 36% year-on-year and the worst since 2003.

That stands in sharp contrast to the total IPO volume elsewhere globally, which nearly doubled to $31.4 billion in the same period, showed LSEG data.

The total value of M&A deals with China involvement shrank by 36% in the first quarter of the year, LSEG data showed, pointing to smaller fees for banks.

As a result, investment banking job cuts that began in late 2023 in mainland China and Hong Kong is set to gather pace this year, bankers and recruiters have said.

Reuters reported in April Morgan Stanley and HSBC ( HSBC ) are cutting dozens of investment banking jobs in the Asia Pacific region, as they ramp up cost-cutting, with weaker dealmaking and sluggish China markets weighing on business prospects.