If anyone has lost out particularly in the recent rounds of redundancies, it’s probably people working in credit. RBS cleared out its credit team last month. Credit Suisse, UBS and BAML have also made credit redundancies. SocGen targeted senior credit traders for its cuts in the US.
In the short term, the likelihood of credit traders finding new positions is slim. As Sue Wallace, MD of credit trading at Citi points out, trading volumes are down as much as 40% on normal levels. The decline is reducing revenues across the market, and reducing the need for staff.
However, credit headhunters say those being let go are nonetheless optimistic.
“There’s a view out there which says there’s a lot of money sitting on the sidelines and the moment confidence returns, volumes will come rushing back in. When that happens, banks will need more staff – quickly. A lot of the people being let go now hope to be rehired in the second quarter of 2012,” says one.
It’s particularly galling that some of the businesses and individuals being cut have been profitable. Naseem Haffar, the US head of loan sales and trading at SocGen told Bloomberg he was frustrated about being let go just because of the European situation: “I built a very good team and it just feels that the bank should look in the long run as opposed to the short run.’
Another, pessimistic, school of thought suggests there won’t be a revival in Q2, however (even if Europe is ‘resolved’) because current redundancies reflect deep structural changes. This was argued by Mohamed El-Erian yesterday.
“Facing a range of internal and external pressures, banks seem to be limiting the amount of capital that they devote to market making,” El-Erian claimed. “…Western banks, whether they like it or not (and most do not), are now embarked on a journey – away from what some have called “casino banking” to what others label as the “utility model.”
In this utility model, vanilla flow credit products might be popular. Others won’t be.
“I know some people who were laid off from structured credit jobs in 2008 and are still looking for work,” says the headhunter. Yet, one former senior flow credit trader from a European bank says he’s regularly approached by ex-colleagues sounding him out for roles in 2012.
“I’m old and I’m grey and banks need senior traders who know what they’re doing to run their desks,” he says. “People are expecting a lot of departures after the bonus round. Senior traders who’ve been doing this for 15-20 years have had enough. They’re pretty miserable in this environment and are saying they don’t need this rubbish any more.”
If nothing else, their departure could create vacancies at the top next year.