Trading volumes are way down and layoffs will soon ensue. We know this – but it may be much worse than we all thought.
Two separate reports in the Wall Street Journal paint a bleak picture for the industry’s most critical line of business. Trading volumes in May fell to the lowest monthly total since before the financial crisis – seven years ago. The Dow Jones Industrial Average has moved more than 2% in a single day of trading just once this year, down from 33 times in 2009 during the same period, according to one report.
Market volatility is non-existent, leaving many traders with extra time on their hands. Banks have noticed, and are preparing a strong response.
Recruiters and people within banks told the Journal that thousands of jobs will soon be cut from overstaffed trading units, particularly in fixed income, where revenues have been plummeting. One recruiter, who suggested that Wall Street has been too slow to react, said that the great trader purge might come in September.
The issue is a virtual perfect storm of market conditions. The bond market is unfavorable, investors in the stock market are happy to sit and wait, and rules have pinched what risks banks can take. Mix in a lull in high-speed trading and a slowdown in big moves by hedge funds like SAC Capital and here we are.
Banks like Goldman Sachs have publicly stated that they plan to wait out the storm, but it appears they’re getting restless.
RBS is following in the footsteps of its next-door neighbor, UBS, in cutting hundreds of trading jobs from its Stamford, Connecticut hub. The cuts are likely to have an equal effect on local businesses in the area that rely on the town’s wealthiest workers.
Right now, we’re seeing people who left banking in 2008 and who haven’t worked since getting hired again. But admittedly, they’re not going into front office roles.
Nervous about losing U.S. clients, BNP Paribas sent a memo out to employees to coach them on how to ease customer concerns over the bank’s impending settlement with regulators. The bank even laid out nine questions bankers may hear along with advice on how to answer them.
U.S. Attorney Preet Bharara was absolutely furious at J.P. Morgan for giving Chief Executive Jamie Dimon a 74% raise just weeks after the bank paid $1.7 billion in fines for its role in the Bernie Madoff scandal. Seeing no real negative consequences for J.P. Morgan – other than the fine itself – Bharara is now looking to step on BNP’s throat with criminal charges.
European regulators may look to slap the hands of HSBC and Lloyd’s for paying bankers “allowances” as a way to get around new bonus caps.
Private equity firm CVC Capital Partners is winding down its infrastructure team. The team’s chief executive has already left, as have several other staffers.
Goldman Sachs is bolstering its M&A team in Asia with internal transfers and new appointments.
Buzz Around the Office
Billionaire T. Boone Pickens has challenged President Obama to a 1-hour workout. He did so via Instagram, where he posted a video of himself running up a hill with the Rocky soundtrack in the background. He was then almost hit by a BMW.
Quote of the Day: “This repeated Chicken Little routine, I will tell you, begins to wear thin.” – Preet Bharara is a letter to J.P. Morgan’s lawyers