2015 is not going well. After the chaos of August, J.P. Morgan analyst Kian Abouhossein is predicting that banks’ revenues and earnings per share could fall all the way through to 2017. And not just in fixed income sales and trading: equities traders are also expected to suffer and IBD deals could be postponed due to volatility.
That’s bad news if you’re say, a senior person at a bank with high and inflexible costs. If your job looked insecure in July, it looks even more insecure now the holidays are over. Costs have become, ‘the key battleground’ in investment banking, say analysts at Morgan Stanley. Redundancies in the third and fourth quarters look inevitable.
If you’re senior, recruiters caution against expecting a smooth transition back into employment. “We spoke to a client last week who told us their priority now is hiring ‘young enthusiastic people who understand the new pay-scales in investment banking’,” says the head of one fixed income trading search firm in London, himself a former trader. “There are plenty of people who are more than happy to earn a low six figure package,” he adds, speaking on condition of anonymity. “Banks now have no interest in hiring the 30 and 40 somethings who can remember the seven figure pay days of the past – even if those people do say they’ll accept less, they’re always going to be bitter and twisted about it.”
That’s not to say it’s impossible to find a new job. Daiwa seems to be building its credit presence and just hired Gary Hibbard as an executive director in fixed income trading. Hibbard has over 20 years of finance experience and last worked in the City in April 2014 according to the FCA Register, when he was head of sterling credit trading at Lloyds Bank. However, Hibbard ins’t representative of a trend and Daiwa isn’t known for its generosity in terms of pay.
Jeanne Branthover, global financial services leader at Boyden in New York, says some senior finance professionals are preemptively moving into new roles, even if they pay less. “I recently moved someone who took a 10% cut in his base salary and was facing a likely 20% cut in his bonus,” she says. “The bank he was working for wasn’t focusing on his business area any more and he was concerned about this job security. – He thought the writing was on the wall and decided to move before he was pushed.”
Another London-based fixed income search consultant says most banks are already imposing hiring freezes for the rest of this year. “If you lose your job at a big bank now, you’ll need to pitch yourself to third tier places or the buy-side,” he says. “The emphasis at all the big houses is on cutting costs.”
The quickest way to cut costs is to re-base pay with an army of eager juniors. “Banks today are putting a lot more emphasis on the staff pipeline,” says Branthover. “They’re much more tied in to hiring from schools than they used to be.” The trader-turned-headhunter says it’s not hard to see why: “The job has become more straightforward – you can’t trade half the stuff you used to trade. Banks just need someone to sit there and do the job without expecting to get paid too much. The guy who used to earn $1m and is now on $300k will always be resentful. There’s no need for that person any more.”
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