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Have banks cut too much?
30 June 2009By Sarah Butcher
COMMENTS
Have banks cut too much? Well, ask those who have been laid off if they got back in the market. Read all comments »
Now that green shoots are sprouting like alfalfa and various institutions are hiring, it’s time to ask the inevitable? Were too many people let go?
In some cases, the unavoidable answer appears to be that they were. Most notably, convertibles desks are seeing a sudden reversal in their fortunes: 80% of staff were reportedly slashed in late 2007/early 2008; now that issuance is up, banks are hiring again.
But convertibles aren’t the only area where banks appear to be making amends for recent headcount reductions.
Last week it emerged that Bank of America Merrill Lynch is rehiring Julian Trott, its former European head of fixed income syndicate for emerging markets into a similar role as head of central and eastern Europe, Middle East and Africa DCM. UBS is rumoured to have hired in structured finance after its few remaining team members threatened to leave due to a lack of critical mass, and JPMorgan is said to have rehired a senior DCM coverage banker.
Having cut 25% of its investment bankers between the end of 2007 and the start of 2009, UBS in particular seems ill-placed to benefit from any upturn.
However, there are people who take strong exception to the notion that banks are now regretting their recent cost cutting. “It all depends whether you think this is a recovery,” says Simon Maughan, an analyst at MF Global. “It’s no good saying capital market billings are up this quarter and everything’s fine. It’s only when government spending is scaled down that the pain will really be taken.”
COMMENTS
Wizard of EC1, Research, Tue 30 Jun 09
Ari - change roles outside the FO are not well paid and it is my opinion that the industry is at risk of a talent issue in 18 months or so. Also, consider the "after tax" implications ( an alarming % of our comp goes back to HMRC, therefore, not worth considering aside from bragging ).The notion that people are "waiting" to get back into the industry is crazy, but I fear a number of senior managers think that people are doing just that - that is naive. People with knowledge, drive and experience have moved on by now. So dump the Chelsa mortgage for a bigger house in Gloucestershire and programme rockets not risk models. If it is a 20% differential and 10% goes to the taxman anyway, I think it is a real option. Question is - will they come back ?
Add your comment »Deutsche Bank, Operations, Tue 30 Jun 09
I don't know where you guys work. but here there's still FAR too many people.
Add your comment »RM, Capital Markets, Tue 30 Jun 09
I think a better question should be, are banks now willing to invest in people? The downturn is really a symptom of putting people into the market who opportunistically take what they can get, at any cost. Whilst more steady and often sane people are quickly overlooked for these top jobs letting the cowboys sink the ship along the way. Maybe financial institutions should rethink their ethos and look to employ people who they can grow and create sustainability in financial markets, instead of just exploiting customers for quick profits.
This might actually require a paradigm shift in the method of recruitment and expectations on employee's instead of just waiting for a turn around in the market and playing musical chairs with same load of cowboy traders, back to exploit the market when their holiday fund runs out.
Thoughtful, Derivatives, Tue 30 Jun 09
@wizard of EC1 -
have u ever traded a financial product or advised on a deal or raised capital for a company?
If not, then please keep quiet. You don't know what you are talking and posting about. We call that keyboard jockeying.
Anon, Capital Markets, Tue 30 Jun 09
Wizard of EC1 - you are spot on. I have worked 9 years FO in the City and the mood is very negative. Nobody wants to work in banks anymore, as they see it as pointless. Regulation up, pay down and tax up. Punters I know that have been made redundant have almost no interest in getting back in. Even a slight uptick in flow business and the banks are losing out on it to newly formed brokers and independents. Even people I know that genuinely enjoy the business would rather go it alone. As you say, if the banks expect there to be a long queue of people a year after huge firings to come back in are very mistaken.
Add your comment »Mick C, Information Technology, Tue 30 Jun 09
I worked on the IT side - Projects are now being let to fail, and you have to remember that most of the support systems are cobbled together legacy systems with a windows front end. They are inherently unstable and difficult to maintain. The banks are a disaster waiting to happen, and then all (us) IT people will ask even more to put it right.
And by the way, there is life outside of Banking, you just have to find it.
Ari Gold, Hedge Funds, Tue 30 Jun 09
Ok, Wizard - fair point. The excessive pay packages are probably only true of the FO (yes, we are all top performers with excellent grades from top academic institutions and we have all worked hard...but come on, anybody who thinks our pay is not ridiculous compared to what people with similar skills, background and drive make in other industries...). If pay differential in IT and backoffice is only 20% (or even if more) and the work is dull, I would agree that I would probably not bother with the disadvantages of commutes, the culture in banks etc. either. It is just that pay diff of FO vs. other industries (outside of HF, PE etc.) is several hundred %, not 20% - and the work is honestly interesting (at least in the areas I have been in). Oh, and some people in FO actually have skills that are a lot less transferable than you IT guys...somebody who structured or traded CDOs for 8 years since leaving uni...not really sure what else he could be used for...
Add your comment »Daniel Burgos Zarazo, Consultancy, Tue 30 Jun 09
The issue is not how much they have cut but who they have cut and where all the banking pariahs end up continuing their sub optimum practices for nasty ripple effects in the rest of the economy.
Something was awfully wrong in the control and performance evaluation side of investment banking. Let us not be steered into another crisis in the same way by the same people who have already mislead us.
Robert, Equities, Tue 30 Jun 09
Face it - we haven't yet seen the tip of the iceberg as far as further banking redundancies are concerned.
Add your comment »IT PM in the sun, Information Technology, Tue 30 Jun 09
Happily sitting outside of a bank at the moment, remembering the pain of trogging in on a daily basis to run some IT project or other. Of course, these days, I'll charge contract rates to the bank to do it and they'll have to pay because half their IT knowledge went in 2008.
Rates are still low at the moment and my unemployment insurance is still more than some of them being touted about, I'll wait a while and jump back when the market is kicking off and land my self a nice two year project for 1/4- 1/2 a mil.
But in the meantime, if I can switch industries I will, I am bored and sick of working for badly run banks, give me an industry that actually does something any day.