If things get nastier, and even if they don't, there will be some things that don't look quite so pretty in the next 12 months.
The former darlings of every trading floor won't be seen in quite the same light now that it's become apparent they're not a short cut to becoming Goldman Sachs and are liable to lose enough money to necessitate a large cash injection from China.
Deutsche closed a London CDO prop desk and both UBS and Morgan Stanley blamed small coteries of prop traders for their write-downs at the end of 2007. UBS has promised to shift its focus away from prop trading and back to good old-fashioned private banking and clients, and Morgan Stanley has promised to do less prop trading and make sure its risk professionals have the clout to say enough's enough.
Banks with burnt fingers are less likely to fall over themselves to build prop trading teams in 2008. But David Korn, European managing partner at search firm Options Group, says there are other options on the table: "The credit crisis has shaken some banks, but there are hedge funds out there which have made loads of money and will be looking to hire - you have to be on the right side of the trade."
UBS wrote down $13.7bn in 2007 and Financial News reports that Morgan Stanley analysts are predicting write-downs of a further $2.6bn in 2008.
UBS employees can appear to exhibit a degree of devotion more commonly seen in small four-legged animals, but one headhunter who works closely with the bank says uncertainty is taking its toll on their loyalty: "UBS is bound to be a poaching target next year. There's been quite a lot of surprise internally over the results - they've always been seen as something of a safe haven."
It doesn't help that UBS announces its bonuses in late January (giving plenty of time for disgruntlement to fester) and has already made it clear that a high proportion of them will be in stock.
UK property isn't looking quite as healthy as it did. New Star was forced to write down the value of its flagship property portfolio by 17% in the five months between July and December 2007. A commercial property slump will be bad news for banks too: Morgan Stanley estimates that banks globally have $212bn at risk of default as a result of lower lending on commercial property and an expected fall in real estate values.
Paul Kennedy, a real estate fund manager at Invesco, says it's "entirely appropriate" that real estate will go down in 2008: "We have been through a period of very strong performance that has led to some sectors of the market being over priced." As a result, says Kennedy, "It's fair to say that the period for substantial growth in real estate jobs is behind us."
After a record year in 2007, could 2008 be the moment that the M&A bankers' bubble bursts? The global head of M&A at UBS has warned that M&A fees could fall by a third over the next 12 months if activity doesn't pick up, and Bloomberg reports that banks on Wall Street are preparing for fees to fall 20%.
Brad Hintz, an analyst at Sanford Bernstein, says the main issue will be reduced financial sponsor activity. But with private equity funds accounting for 40% of all M&A deals in the US and only 20% in Europe during 2007, he says the US is likely to be worst hit by the fall.
With conditions deteriorating in the US, and in danger of deteriorating in Western Europe, most banks are looking to increase activity in Asia as a way of hedging against a downturn. But will the continent come through?
Mike Hume, chief economist for Europe at Lehman Brothers, says growth in Asia ex-Japan is predicted to slow by around a percentage point (admittedly to a still robust 7.6%) in 2008 as export markets outside the region fall.
And Hintz at Sanford Bernstein says banks that are relying on Asia to take up the slack are sadly deluded: "Asia is already over-banked and it costs a huge amount to bring in deals from there. I am a great sceptic when it comes to the theory that origination in Asia will offset declines in the US."
How much lower can they go? A lot lower, according to Lehman Brothers, which is forecasting that CDOs will decline 50-60% on the levels of 2007 as default levels rise. Separately, Credit Suisse predicts CDO defaults will triple in 2008, and headhunters believe banks that were slow to cut CDO teams in 2007 may be forced to act if the market doesn't pick up soon.
The eFinancialCareers editorial team is taking a protracted Christmas break. We will be back in full force on January 8th. Happy New Year!