Ok, things don't look so great if you're working in leveraged finance or structured credit. But banks' latest results show it's not all bad.
JPMorgan and Bank of America are the latest to come clean, following in the footsteps of Citigroup, and Goldman, Lehman, Morgan Stanley et al.
Admittedly it doesn't make pretty reading: JPM saw profits plummet 70% over 3Q06 and B of A confessed a 93% reduction in profits at its global corporate and investment banking unit. But closer inspection shows that some businesses are, surprise, surprise, actually doing quite well.
At JPMorgan, for example, corporate finance advisory fees rose 36% in Q3 over the same period last year and net income in the asset management division was up 51% on the previous year. At Citigroup, equity markets revenues were up 19%, while revenues from equity underwriting nearly doubled, and 3Q advisory fees rose to record levels. Private banking meanwhile seems to have had a universally good quarter.
Much as gloom is a good way of deflecting unpleasant surprises, there's a danger of fallout from the credit cloud distracting attention from the sunny conditions on offer elsewhere. One veteran financial markets recruiter confirms as much: "The next 18 months seem fairly solid: equities trading and M&A are still fairly busy; it's the credit side that's taken a hammering. The UK, Europe and Asia in particular remain strong."
This doesn't mean bonuses will necessarily be plump for banks' asset managers, equities professionals, corporate financiers or private bankers. After years of subsidizing everyone else, fixed income types who don't lose their jobs (and yes, they are likely to be in the majority) will be looking for a little love in return.
Banks are already massaging pay expectations downwards. Bank of America, for example, says its losses were "partially offset by lower compensation". Public displays of staff lopping at Morgan Stanley, JPMorgan and UBS should be enough to put a stop to avaricious tendencies elsewhere.
However, banks won't be able to get away with paying the private bankers and corporate financiers of this world as little as they'd like to. These divisions are where the money is likely to be in 2008. And no bank likes to see money walk out the door.