Equity markets may be plummeting, but equity businesses are actually doing surprisingly well. Even more surprisingly, there appears to be some hiring going on.
Q3 releases illustrate this strange resilience. Morgan Stanley, for example, saw equities sales and trading revenues leap from $6,572m in the first nine months of 2007 to $8,241m in the first nine months of 2008. Merrill Lynch, still bleeding in fixed income, saw its equity markets revenues jump from $6.1bn to $9.6bn over the same period. And SocGen achieved a 14.3% increase in revenues from equity flow products in Q308 vs. the same period last year.
Strategists put the good times down to volume. “Flow has been pretty high,” says one. “When you inject a lot of volatility into the market, it forces change. Combine that with forced deleveraging and you get even higher volumes. As long as you control risk you can do well in this environment.”
Headhunters say banks are trying to capitalise on this opportunity. Barclays Capital is apparently ‘aggressively building’ a European cash equities business, having already gone into cash equities in Japan. And Nomura is said to be hiring equities salespeople and researchers to fill the gaps left by Lehman bankers who are departing for BarCap.
New entrants, such as Liberum Capital, are also said to be building an equities sales and trading capability.
This doesn’t mean that bonuses will be strong. International financial services search firm Options Group is predicting that bonuses for London-based VPs in equity cash sales will be down 30% year on year, with salaries forecast at 60k-75k, and bonuses put at 200k-300k.
Alex Williams, consultant at search firm Pelham International, says equities salespeople and traders who expect to be paid up on last year are sadly deluded: “They’re probably going to have to cross-subsidise fixed income bonuses.”