As banks continue to cut costs, which front office banking jobs are least likely to disappear this year?
In a note out today, banking analysts at UBS offer some suggestions. If you're a revenue-generating employee in an investment bank, this is where 2016 has begun promisingly and this is where it hasn't.
Despite suggestions last month that banks were letting go of analysts and associates, UBS says the year has begun OK in M&A: "Despite a 63% drop in announced volumes, M&A is holding up well year to date." The pipeline is reportedly up 15%.
While M&A jobs are comparatively safe, high yield jobs are relatively dangerous. UBS notes that high yield issuance is down 68% year-to-date and that high yield credit spreads have widened by 80bps since the start of the year, more than twice as much as in the fourth quarter of 2015. As a result, they suggest that banks could be nursing "sizable mark to market losses" on their high yield trading books. High yield teams are usually small and banks already began cutting them late last year after building them up in 2014.
Equity capital markets (ECM) jobs also look precarious. ECM bankers have gone from being the darlings of IBD to the pariahs with nothing to do. Initial public offerings (IPOs) are down nearly 75% so far this year, and overall ECM volumes are down 40%. Heads will roll if this goes on.
There are ways in which FX jobs look good this year. UBS's analysts note that FX volatility increased in February, and that this is typically a positive leading indicator for trading volumes. FX derivatives volumes on the CME are also up by 11% year-to-date.
However, UBS says year-on-year comparables in FX could be "challenging." We assume they're thinking of UBS's own FX traders, who benefited from volatility in the Swiss franc in the first quarter of 2015, as did those at J.P. Morgan. FX traders at banks like Citi lost out in the first quarter of 2015, however, and should have less problem beating their targets this year.
UBS's analysts are less certain on the outlook for equities traders. On one hand, they note that volumes for cash equity and index option trades are up 20% to 30% in the US. On the other, they note that cash equity volumes in Europe are down 10% year to date, and that the VIX has remained elevated - suggesting an unfavourable environment in equities. The worst area within the equities business is thought to be European and APAC derivatives trading, although the data here is "scarce."