If work in an investment bank in 2018, you either want to be in equity derivatives or you want to be in commodities. So suggests the latest banking monitor from intelligence firm Coalition.
As the chart below (compiled by us) reflects, equity derivatives and commodities have both had an excellent start to the year. In equity derivatives, revenues rose 35% year on year in the first six months of 2018. In commodities, revenues rose 38%. Nowhere else came close.
Within these broad categories, there were some particularly thriving subsectors. In equity derivatives, Coalition says the Americas outperformed EMEA and APAC with U.S. flow derivatives doing well. Global strategic equity transactions also had a good six months. However, structured equity derivatives declined marginally thanks to a poor start in index products and single name exotics. In commodities, Coalition says the rebound is down to the unusually poor performance of commodities businesses in 2017 and to one off gains in energy and base metals trading.
Coalition doesn't say so, but given that some of its other research puts J.P. Morgan as the market leader in both commodities and equity derivatives trading, the U.S. bank would seem to be the place to work now.
By comparison, credit trading businesses and G10 rates trading desks had a particularly bad start to the year, with revenues declining 7% and 13% respectively. Coalition points to poor performance in EMEA cash rates, repo and munis, and to underperformance in G10 investment grade, G10 high yield and emerging markets flow credit, but to a strong performance in collateralized loan obligations.
The bad news is that none of this is feeding to through to front office job opportunities. In the first six months of 2018, front office producer headcount fell 1% to 51,900 according to Coalition, with particular reductions in equity research, Americas M&A and oil and gas and healthcare teams. There were cuts in macro teams too, but these were offset by hiring for credit (despite the drop in revenues). The only good thing about the dwindling front office job opportunities, is that the coincidence of rising revenues and falling headcount in areas like equities is leading to rising productivity. In an ideal world, this might be expected to lead to a rise in pay.
For those of you who are interested, we've added all the Coalition charts below.
Fixed income revenues, by business
Equities revenues by business
Investment banking division revenues by business
Front office headcount by business
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