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What will go cold in 2009?

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.

3. M&A

Global M&A deals fell 30% in value during 2008, with European deals hit the hardest of all.

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.

6. UBS

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.

9. Pay

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).

10. Loyalty

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.

Comments (10)

  1. Oh Sarah,

    Seasons Greetings, I see you have ended the new year with a bang. I do appreciate you honest unbiased opinion though.

    But it means my career ambitions are getting more and more elusive.

  2. Excellent you kept your promise!
    Well done!

  3. Sarah, why do you believe french banks need to cut 10-20%? European commercial banks e.g. Santander, ING, BNPP, HSBC typically don’t cut 20% as US BB banks or European risk taking bank (CSFB, UBS)

  4. Commoditiy trading will remain buoyant, but emploers still need to trim staff to a more sensible rate and there are a number of better qualified people out of work who may well be used to shore up obvious areas of deficiency to the detriment of some present incumbents..it may well also drive down the salry costs as those out of work will be significantly cheaper to employ than those currently sitting on hardly justifiable salaries

  5. HH: I don’t think French banks need to cut staff across their operations, only in their investment banks. At BNP Paribas, for example, the CIB unit accounted for 32% of pre-tax profit in 2007, but will almost certainly make a loss in 2008. Trimming staff by 5% looks modest compared to the change in conditions.

    It also seems likely that equity derivatives revenues will be depressed in 2009. This too suggests that French banks will need to reduce headcount in their big ED units.

    Sarah, Editor, eFinancialCareers Reply
  6. Sarah, would contacting your contacts at BNPP/Socgen give us some colour?

  7. If UBS is as cold as you claim, then why has the share price outperformed the Dow Financials since end of November? Granted leverage loans business and M&A is down. However, with the balance sheet now in top shape with the smallest percentage of troubled assets in the industry, courtesy of the Swiss central bank; and enough pre-Lehman refinancing to last through an Ice Age, UBS just might be in a position to come out of the woods long before the 50x leveraged UK/US financials do. First in, first out?

  8. Seiji, you don’t read much financial press, do you?- Just one example to bust your point. Check where MS’s lev. was a year ago, then compare it to its current lev. ration. Oops!

  9. BigL please do not compare the US GAAP leverage ratio with European and Swiss IFRS one. The former holds no water and can be changed at a click of a button due to off balance sheet vehicles, derivative positions and netting. Seiji was correctly reffering to RWA to Tier 1. Think before you post.

  10. Risk-Weighted Assets over Tier 1? Not so sure on the comparability of those accross the Atlantic. I think Morgan Stanley published a report on Leverage in July. Was in FT Alphaville.. before Lehman.. happy times..

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