UK
Irish banks have struggled to both pay and retain people working within their capital markets divisions, despite the fact that they remain relatively profitable. Bank of Ireland’s interim results demonstrate this trend.
At the end of June, there were 1,105 people working in BoI’s capital markets division. This is a reduction of 291since this point last year and over 450 since the end of 2009. Clearly, the sale of Bank of Ireland Asset Management (BIAM) would have had an impact, but this would have removed around 120 people.
In itself, this shouldn’t be a concern, but while BoI posted a (much improved) loss of €723m in the first half, its capital markets division produced a pre-tax profit of €134m, even after NAMA impairment charges of €143m.
This was in part down to a return to the black for its corporate banking arm (to €79m), but its global markets division also increased profit by 58% to €60m in the first half.
Income per employee in BoI’s capital markets division (before all the impairments) was €352k for the first six months of 2011, which is a 9% increase on this point last year.
BoI is, of course, downsizing and while the capital markets division will have felt some pain, it’s likely that many people would have left of their own accord.
Both BoI and AIB have been hampered by government pay restrictions, and staff retention in their capital markets division has become a real concern.
Bank of Ireland has wiped out €72m from its cost-base, primarily from reducing staff numbers by 346 over the first half. The biggest headcount reduction is within capital markets, but its Irish retail banking operation has also lost 101 people, and UK financial services has seen 223 depart.
Despite this, the bank has been increasing headcount in certain areas of the business. BoI has been redeploying people to its head office function, where staff numbers increased by 189 and recruited 80 people in its life business as it prepares to dispose of New Ireland Assurance.
Profitability in capital markets is a trend which has always been in place in Irish Banks, the public misconception that all staff are equally to blame has been encouraged by the media.
The staff being paid these sums are paid them for a reason, they are a solid return on investment.
The continued decline in Irish banks profitability is due to losses from loans lent by the people who remain in the employment of the banks.
Irish government owned banks will never return to the levels of profits they have made in the past.
Public outcry which has caused the blackguarding of all staff within capital markets (due to their higher wages) will result in good staff leaving, and the weaker in the pack remaining. This is very apparent in the ranks of people who have left. Top heavy, overpaid staff who are happy not to rock the boat.