Deutsche and BarCap confirm it: there will no hiring, no firing. Deutsche sets the pace with a 20% compensation cut

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Josef Ackermann

If you’re going to get a new job in financial services, you should be able to pick one up in the second quarter. Historically, this is when most hiring happens. This is, however, the second quarter and recruiters are still complaining of hiring freezes. “Bank of America, UBS, Deutsche, Goldman Sachs , they’ve all got them”  says the head of one boutique. “You’ll still find some hires taking place, but they’re very business specific.”

Today’s pronouncements from Barclays and Deutsche Bank, both of which have released their second quarter results (click here for Barclays, click here for Deutsche), suggest the stasis is likely to persist. While Q1 may have been ok (at least for Barclays, which achieved a 3% increase in its first quarter investment banking revenues, although a 5% decrease in profit), things appear to have deteriorated since.

Q2: Not so good

Bob Diamond said the stimulatory effects of the LTRO are wearing thin and that, “The second half of the year won’t be like last year” and that BarCap was a big sluggish in April.

Deutsche was less specific on the outlook but said things remain ‘challenging.’

This follows yesterday’s statement by Brady Dougan, that Credit Suisse had experienced a deterioration in conditions in April.

Q1: Scraping by

In the circumstances, a worsening of conditions is the last thing banks need.  Revenues at Deutsche’s corporate and investment bank fell 11% year on year in the first quarter as the bank cut risk (see graph below).  Return on equity in the business fell from 39% to 26%.

[caption id="attachment_94512" align="aligncenter" width="605" caption="Risk now off in Deutsche CIB"][/caption]

Barclays put a gloss on the performance of its investment bank, talking of an “encouraging start to the year,” despite a declining in ROE from 18.4% to 17% and a rise in the cost ratio from 61% to 63%.

No firing, no hiring

Deutsche cut headcount at its corporate and investment bank by 514 people between December and March and says it has finished its job cuts.

Barclays is in the process of cutting £2bn in costs by 2013, but didn’t mention additional redundancies in the business unit previously known as Barclays Capital.

In the circumstances, however, neither Deutsche nor Barclays seem likely to do much hiring. Bob Diamond spoke at length about how the cost ratio at all units must remain below 65% and the return on equity at Barclays Investment Bank must be a sustainable 15%. With the ROE falling towards 15% and the cost income ratio rising towards 65%, the bank will be watching costs.

Similarly, with the cost income ratio in its investment bank rising (65% in Q1 2012 vs. 61% in Q1 2011), Deutsche Bank meanwhile seems to have taken a scythe to pay. Remuneration accrued per head in the corporate and investment bank in the first quarter fell 20%, more than at any other bank to report so far (Such are the possible side effects of working for a European bank and receiving an unusually large amount of your compensation in cash)...

If you want to get a job soon, your best bet may be Barclays Wealth Management Business, which has 55 vacancies in the UK and managed to increase its year on year profitability by an impressive 30%.