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Morning Coffee: 47,000 new UK banking jobs? Bad news for Deutsche derivatives bankers

One good quarter doesn’t make a banking recovery. A good quarter, coupled with economic growth, coupled with a supportive regulatory regime, might do the trick, however.

A new report from PwC says the UK financial services sector could, under the right conditions, generate an extra 47,000 UK financial services jobs by 2020. Under the wrong conditions, however, it will create hardly any jobs at all.

PwC economists fed two sets of conditions into their models. In the first, they looked at what happened when the financial services sector benefited from a, ‘robust, but supportive, regulatory regime’ and from beneficial economic and market conditions. Under these circumstances, the model predicted that 47,000 new financial services jobs would be created, leading to the manifestation of 218,000 jobs across all sectors of the UK economy.

In the second set of conditions, PwC economists postulated a situation of lower economic growth with weak domestic, weak international economic conditions and a harsher regulatory regime. 12,000 jobs were created in total. Guess which situation looks more likely?

Separately, Deutsche Bank’s intention to cut its balance sheet by 20% in order to achieve a 3% leverage ratio by 2015, as reported in the Financial Times, looks a bit dubious if you work in some areas of the German bank.

The FT says Deutsche intends to improve its ratio of overall equity to loans by adopting new accounting rules for derivatives, by cutting its €240bn cash pile and by shrinking non-performing loans in its non-core unit.

Analysts have long been accusing Deutsche Bank of being horribly under-capitalized, whilst suggesting that the German bank cut its exposure to derivatives to get its leverage ratio down. Deutsche has, however, resisted making any cuts to its fixed income sales and trading business, preferring to play a game of endurance in the hope that smaller fixed income rivals will drop out. Investor pressure to improve capitalization could now be forcing its hand.

Meanwhile:

JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley made a combined $17.6bn in second-quarter net income when they reported in the past 10 days. That is the best since the same period six years ago. (Financial Times)  

Foreign banks are flooding the Hong Kong brokerage market and local HK brokers are giving up and becoming taxi drivers. (Bloomberg)

Evercore has hired a banker from UBS to open a Singapore office. (Reuters) 

Technology is stealing banking jobs. (Financial News)

Morgan Stanley is having an identity crisis. (Quartz) 

Goldman Sachs is only the third largest bank in terms of trading revenues. (Quartz) 

Stephen Hester only gets to spend a few summer weekends at Broughton Grange, his country manor. (Financial Times) 

The Federal Reserve may prohibit banks from trading in physical commodities. (Reuters)  

This is the first significant heatwave in the UK for seven years. (New Scientist) 

The Jubilee Line has more fungal cells than the Central Line. Bad news for bankers in Canary Wharf. (New Scientist)  

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