2008 was a cold year to be a banker: for all the warm spots in financial services last year, there were multiple icy ones. It was most freezing in the vicinity of:
1. Lehman and Bear Stearns
Suffice to say, neither institution still exists. After their demise, around 6,000 out of 14,000 Bear Stearns bankers found solace in JPMorgan, and around 10,000 Lehman bankers in the US found solace in Barclays Capital. In Europe, Nomura took in around 2,500 Lehman equities and M&A bankers and revived them with steamy guarantees. The remaining 2,000 fixed income staff in London were left to fend for themselves in the wastelands of Canary Wharf.
In some cases, the havens proved temporary: Barclays Capital ejected 3,500 ex-Lehmanites in late December.
2. Russian bankers
Moscow went from steaming to freezing in the space of a few short months. In August 2008, Deutsche Bank, Renaissance Capital, and Lehman Brothers were all still hiring. This soon changed following the fall of Lehman. By December, Deutsche Bank was cutting 30% of its global markets staff in Russia, more than double the proportion it trimmed elsewhere. Goldman Sachs, Troika Dialog, Renaissance Capital, Alfa Bank and Uralsib also cut Russia-based staff.
'No one is hiring in Moscow now," says Olga Selivanova, a headhunter with Morgan Hunt in Moscow. "All the hiring was put on hold a few months ago and now people are being laid off."
3. Anyone receiving a bonus
There's a nasty pallor around bonuses and it's not only because they're down 50% on last year.
In a December research note, Merrill Lynch banking analyst Guy Moszkowski made the ominous observation that the banking industry was in the process of, 're-pricing its labour pool.'
After a dire year in 2007, who would have thought UBS bankers would have an even worse year in 2008? However, with the share price declining another 70% in the past 12 months and a further 6,000 plus job cuts announced, UBS ended the year with the dubious accolade of the bank which cut the highest number of staff as a proportion of the total in 2008.
5. Hedge funds
From the liquidation of Ron Beller's Peloton in February to the ignominious ban on end of year-end withdrawals at two Citadel funds in December, hedge funds had their worst year ever. According to Eurekahedge, hedge fund assets under management fell 13% over the past 12 months.
"There are fewer and fewer jobs for analyst and senior analysts in hedge funds," says Claude Schwab, a hedge fund specialist at Heidrick & Struggles. "But we're still seeing portfolio manager and chief of staff positions at the senior level."
2009 doesn't look any better. Fees are expected to come under pressure, funds are expected to close, and thanks to Madoff regulators are likely to take a much closer interest in hedge fund-like businesses than previously.
6. Leveraged financiers
Leveraged finance had a freezing end to 2007 and remained heavily chilled throughout 2008. Little surprise, therefore, that leveraged loan teams shriveled to a shadow of their former selves during the year. "In 2007 there was still hiring going on, even past August. But in 2008 there were just redundancies," says one (former) leveraged finance headhunter. "To give you an idea of the damage," he goes on, "Goldman had around 20 people in its European leveraged loan team and Citigroup had around 25. Both are now down to about six."
One of the lone hirers of leveraged financiers in 2008 was RBC, which hired a team from CIBC in March.
With bids for existing European leveraged loans falling to just 60.70 cents in the dollar and defaults expected to soar in 2009, leveraged finance is sadly unlikely to recover anytime soon.
7. Ratings agencies
Ratings agencies also went from bad to worse. Moody's and Standard & Poors both cut staff and DBRS closed its office in Europe to the detriment of the 43 people who worked there. To make matters worse, dodgy emails sent by ratings agency analysts in the boom times surfaced, saying things like, "it could be structured by cows and we would rate it."
8. DCM Professionals
With eurobond issuance down more than 90% following Lehman's collapse, it's hardly surprising that DCM bankers felt disproportionate pain. "There were cuts in DCM across the board and barely one hire all year," says Lee Thacker, of Silvermine Partners.
9. Prop traders
Falling leverage and reduced risk appetite don't play well to prop traders' strengths. Commerzbank, JPMorgan, Credit Suisse, Morgan Stanley and Natixis all publicly pulled back from prop trading. Even arch prop trading house Goldman Sachs committed to seek out more stable income streams in areas like wealth management. Redundant prop traders hit the streets. Many tried to get jobs in dedicated prop shops, which were swamped with CVs.
10. Goldman Sachs and Morgan Stanley
Who would have thought that Goldman's share price would end the year nuzzling $77, or that Morgan Stanley's stock would see a 70% fall? Then again, who would have thought that Morgan Stanley would be saved only by Mitsubishi UFJ, or that both banks would give up their broker dealer status (and all advantages incurred by higher leverage) to become bank holding companies? Whether this is really the route out of the deep freeze still remains to be seen.
Obviously, there were plenty of other cold places to be this year - from Citigroup to Merrill, from the remnants of real estate units to financial sponsor teams. Unfortunately, however, we can't fit them all in.