21,000 people from last year still out of work, another 11,000 job cuts coming, new jobs drying up, partner pay to halve at Goldman Sachs, RBS to definitely pull out of equities: the gloom and its antidotes

eFC logo
Financial services industry in intensive care?

Last week, we published information on a research report from Creditsights, which was optimistic about the potential for US banks in 2012. Today, any optimism has been blown out the water by a torrent of gloom.

The components of this torrent include the following:

21,000 people who lost their jobs in UK financial services last year are still out of work

The Sunday Times cites a study by IMAS, the organisation which monitors the number of firms registered with the FSA and the number of approved persons working for them.

This says that 21,025 individuals who dropped off the FSA’s register during 2011 were still out of work at the end of the year.

Depressingly, it seems likely that many of those people will be looking for jobs in 2012.

The antidote: IMAS’s figures include a lot of IFAs, so these redundancies weren’t restricted to City-style jobs. Not all 21,0000 people will be trying to find new jobs as traders or in product control.

Another 11,000 job cuts are forecast in the next three months

PricewaterhouseCoopers and the CBI have produced their latest report on the financial services industry this morning. They estimate 9,000 financial services jobs were lost in the fourth quarter of last year and that another 11,000 will be lost in the first three months of 2012.

The antidote: The PWC and CBI survey covers all banking jobs, including those in building societies and retail banks. Within securities trading, it (strangely) shows a rebound in optimism about hiring: on balance +66 respondents said they were positive about staff trends for the next three months; last year, only +13 did. Separately, JPMorgan’s analysts released a report last week predicting additional redundancies this year, but the numbers were quite modest: a 5-10% reduction in the second half.

A bad time of lower pay is coming at Goldman Sachs and Morgan Stanley

Analysts don’t think the end of 2011 or 2012 are looking particularly great over at Goldman Sachs or Morgan Stanley. Last week, analysts at Bernstein cut their fourth quarter earnings forecasts for the bank from $3.15 to $0.77. At the same time, analysts at JPMorgan cut their earnings per share forecasts for the whole of 2011 for Goldman Sachs by 37% from $5.84 to $3.70. They also cut their forecast for full year 2012E EPS by 19% from $13.50 to $10.95.

Meanwhile, the Wall Street Journal has spoken to people at Goldman who say partner pay could halve this year and that pay for some people in Goldman’s fixed income trading will shrink by 60%, with some getting no bonus at all.

At Morgan Stanley, Bernstein analysts are predicting a loss of $0.75 a share for the fourth quarter, up from their prediction of a loss of $0.19 previously.  The Wall Street Journal says people ‘familiar with the matter’ are predicting that bonuses for some bankers at MS will fall 30-40% vs. 2010.

The antidote: While some people are expected to lose badly, on average the WSJ predicts compensation per head at Goldman Sachs will fall only 10% to $385k year on year for 2011.

The number of new financial services jobs is drying up

The Financial Times has got a new report from recruitment firm Astbury Marsden, which says the number of new job openings in the City of London fell 43% in December.

The antidote: So what? Jobs are always down in December. Astbury Marsden mostly covers the middle office. For 2011 as a whole, Astbury Marsden says the number of jobs on offer was down a far more modest 8%.

RBS will announce this week that it does not want its cash equities division

The Times says that RBS will sound the death knell for its cash equities division this week and that senior bankers regard the chance of a sale as ‘close to zero.’

1,200 jobs will go. The Times also reports that John Hourican, head of GBM and Peter Nielsen, head of markets, wanted to RBS to get out of cash equities division 2 years ago. Bizarrely, it’s been building it up ever since.

The antidote: It doesn’t seem certain that no one will buy any of RBS’s cash equities business. The Times also reports that Oriel Securities is very interested in Hoare Govett, as is Numis and that Jefferies is also taking a look. Oriel apparently wants to hire “50 key Hoare Govett staff”, including salesmen and analysts.

More importantly, when all redundancies at RBS are added, including those outside equities, the new thinking is that redundancies at RBS will total 5,000 instead of the 10,000 mooted last week. RBS itself has apparently said that 5,000 is the more likely figure.