Goldman Sachs has warned that its performance in Q108 may not compare to its exemplary standard in 2007; Morgan Stanley has reported its first ever quarterly loss; and most banks are said to be contemplating further job cuts in the opening months of next year.

And if things are bad now, the danger is that they’re about to get a whole lot worse.

David Trone, analyst at Fox, Pitt Kelton in New York, predicts that Goldman’s results will be “meaningfully weaker” in the first quarter of 2008. Citigroup has already made 30 people in its CDO team redundant and is said to be contemplating further redundancies in the second week of January, and headhunters say banks that have so far been circumspect when it comes to job cuts are about to get considerably more direct.

“The cuts are going to be a lot deeper in March,” says Lee Thacker, of search firm Silvermine Partners. “Banks will struggle to generate revenues to justify their cost base in the first quarter.”

“Banks have tried not to panic. In the past they cut too deep and had insufficient staff to manage the rebound,” says Alex Tracey, at Clifden Partners. “This time they didn't want to get caught short, but there is now a lot of uncertainty about next year.”

Bonuses

Meanwhile, although average total comp at Lehman is up 10% and bonuses at Goldman Sachs and Morgan Stanley are up 6% (with Morgan reported to have delayed payouts in order to match Goldman), windfalls are said to have been targeted at top performers.

“Goldman was all over the place,” says one headhunter. “We’ve seen people paid anything from down 20% to up 40%.”

“There’s a lot of disappointment at Morgan Stanley,” says another. “They’re doing their best to retain talent, but senior managers have been telling staff fixed income bonus pools would be down 35-40%.”

The message is clear: you are either in the club, or you aren’t.

And if you’re not? Watch your back in 2008.