JPMorgan's fourth quarter results are out for 2014 and the US bank has just embarked upon its accompanying conference call. In a busy week for U.S. banking results, JPM is the first U.S bank to report. This is what you need to know if you're contemplating looking for a new banking job this year.
1. You probably won't get a job in consumer banking at JPMorgan. You might get one in asset management
In 2013, JPMorgan cut 7,557 jobs overall. However, there was big variation in headcount trends by business. 13,058 jobs were taken out of consumer banking, for example. On the other hand, 228 people were added to the corporate and investment bank and 1,583 people were added to JPMorgan's asset management business.... It probably helps that the return on equity in JPMorgan's asset management business was an impressive 23% for 2013.
2. Based on the fourth quarter, it doesn't initially look much like JPM can afford to hire for its corporate and investment bank
In the fourth quarter, 81% of revenues in JPMorgan's corporate and investment bank were sucked by costs - up from 65% the year before. Return on equity in the business fell to a mere 6%, down from 17% in the fourth quarter of 2012. This doesn't look like a business with a lot of room for adding costs.
However, much of the poor performance at JPMorgan's corporate and investment bank in Q4 was a product of the accounting measures funding valuation adjustment and debt valuation adjustment. When these are stripped out, return on equity in corporate and investment banking was a more respectable 15% in the fourth quarter of 2013 (down from 20% the year before) and costs were a mere 61% of revenues (steady on the year before). So may JPMorgan will be hiring investment banking staff after all...
3. Pay is dwindling for corporate and investment bankers, but it's rising for asset managers
For full year 2013, JPMorgan accrued an average $207k per head of staff in its corporate and investment bank. This was down 5% on 2012.
During the same period, it accrued $243k per head in compensation for staff in its asset management business. This was up 2% on 2012.
4. 2013 was a great year for equity underwriting professionals. Expect banks to add ECM expertise in 2014
Equity Capital Markets (ECM) revenues rose 42% at JPMorgan last year. M&A revenues fell 12%. Where would you rather work?
5. 2013 was a good year in equity sales and trading, but was a mediocre year (at JPMorgan) in fixed income sales and trading
Based upon JPMorgan's results, 2014 may yet be the year in which banks regain their appetite for hiring in equities: revenues in the bank's equities sales and trading business rose 8% last year.
Over the same period, revenues in fixed income sales and trading flat-lined - although this may prove very good compared to the rest of the market, where revenues are expected to be down significantly.
Deutsche Bank analysts are predicting 20,000 investment banking job cuts in 2014. Equities jobs look safe. Fixed income jobs don't.
6. Bad things happened to corporate and investment banking revenues at JPMorgan in EMEA and Asia Pac in the fourth quarter. JPM may think twice about hiring here.
In the final three months of 2013 revenues at JPMorgan's corporate and investment bank fell 36% in EMEA and 36% in Asia Pac. This would not seem to augur well for recruitment in either region at the start of 2014.
7. Trading jobs in investment banks have become far (far) less exciting
Last year, JPMorgan reduced its Value at Risk (VaR) by 66% overall and by 51% in the corporate and investment bank. Traders at JPMorgan would appear to be having a lot less fun than before.
In particular, it would seem that far less fun is on offer in JPMorgan's Treasury and Chief Investment Office - ground zero for its enormous 2012 trading loss. VaR in the Treasury and CIO was slashed by 93% in 2013. In the small print JPMorgan does, however, note that its figures for VaR don't include risk embodied in the retained credit portfolio. The reclassification of items in the CIO trading book could therefore help explain the reduction...