2009 is likely to remain a cold climate for financial services jobs. Securitization and leveraged finance will stay deeply frozen, and some previously hot areas are expected to chill. Expect big temperature changes in -
1. Rates and FX
Rates and FX desks had a good 2008, but their luck may run out in 2009. Credit Suisse predicts that lower volumes related to global macro hedge funds will have an adverse effect. This could lead to reduced profitability and job cuts in the first quarter.
"A lot of recent FX volumes have come from deleveraging," says Alasdair Fleming, an FX consultant at headhunter Options Group. "In the last few weeks that's largely disappeared. Any growth next year is likely to involve the odd strategic hire."
2. Jobs in Asia
In 2009 it will no longer be possible to reinvigorate your career with a quick move to Hong Kong or Shanghai. Banks began cutting Asia Pac jobs in earnest in Q408 and further reductions are expected in Q109.
Morgan Stanley's Q4 results underscored the elusiveness of the Asian dream: its Asian investment banking revenues fell 58% during the year; its US and European revenues rose and fell 11% respectively.
Although 'crisis dealmaking' is likely to drive M&A activity in 2009, funding constraints mean overall volumes will probably stay low. Sanford Bernstein analyst Brad Hintz expects the volume of announced mergers and acquisitions to fall 25% in 2009 and a further 15% in 2010.
M&A teams are likely to be trimmed further as a result, although headhunters say senior FIG and energy bankers will stay desirable.
4. Private equity
Things don't look as good as they used to for private equity. The moribund market for leveraged loans continues to make it impossible for funds to execute big buyouts. And at the end of 2008 there was evidence that institutional investors were engaged in a mass offloading of their private equity stakes.
PE funds started cost cutting in Q408, with 3i and Terra Firma both trimming staff.
"Private equity hiring has been greatly reduced since September 2008 and we expect that to continue in 2009," says one leading PE headhunter. "There may be some interest in operational and turnaround profiles, but that's about it."
5. Jobs at big French banks
BNP Paribas and Société Générale were slow to cut jobs in 2008, but may get a little faster at it come the New Year. In December, BNP promised to trim 5% of staff at its Securities Unit after trading losses wiped out profits for the first three quarters of 2008. However, a cut of 5% looks lenient alongside headcounts of 10-20% at other European and US banks. We expect more to come.
With writedowns totalling $48.6bn at the end of 2008, UBS has written off more than any other European bank. In 2008 it also let go of a higher proportion of staff than any of its US or European rivals. Surely, therefore, things can't deteriorate further?
Credit Suisse analysts seem to think they can. They're predicting a 44% decline in investment banking revenues at UBS in 2008, compared to an 8% reduction across the market as a whole. If they're right, more investment banking jobs will have to go at UBS in 2009.
7. Fund management jobs
With assets under management falling and the fund management industry in the grip of consolidation, 2009 looks set to be a year of cost cutting for fund management firms. In late 2009, Lewis Sanders, chief executive at AllianceBernstein warned that pay per capita at fund managers will need to halve if headcount reductions are to be avoided.
"Up until Lehman collapsed, funds were still looking to recruit," says Samantha Donald at fund management recruiter Shepherd Little. "A number of houses have since made redundancies and so can't hire."
8. Dresdner Kleinwort
However you look at it, it doesn't look promising for bankers at Dresdner K in London. Despite denying a Bloomberg report that it planned to bin the entire Dresdner K M&A team, Commerzbank hasn't made any particularly promising noises about its future intentions. The combined Commerz and DK UK M&A presence will apparently be very much smaller than in the past.
Can pay in 2009 really be any worse than in 2008? Yes, if you're out of work (unless you're French and happen to sign on back home).
With most options so far under water that they will never resurface again, loyalty to particular institutions is likely to take a hit in 2009. This could ultimately have a positive effect on hiring - recruiting institutions won't need to buyout any stock.