Is 2015 going to be a good or a bad year for finding a new job in banking and financial services? That all depends upon who you ask and where you choose to cast your gaze. There are certainly some very good reasons to be fearful of what this year may bring - just ask anyone who works on a high yield or emerging markets desk, or consider what the effects of Greece exiting the euro might be.
Even so, there are optimists. Plenty of people think 2015 could be a good year for financial services jobs. Some even suggest that it will be great. Here's why.
2014 ended on a high for finance recruitment. City of London recruitment firm Astbury Marsden thinks the number of new jobs on offer in the City in the final quarter was up 22% year-on-year. It says hiring was especially active in November, before the pre-Christmas slump. “The City jobs market gathered strong momentum in 2014, with recruitment activity finally catching up with the recovery seen over the last few years in the wider UK jobs market,” says Astbury Marsden director, Adam Jackson.
2014 should be the year in which volatility is resurgent. Deutsche Bank is predicting greater volatility in the equities market. Meanwhile, concerns over the eurozone and Russia, along with expected interest rate increases in the US are expected to fan volatility in the foreign exchange and rates markets.
Research firm Tricumen suggests that in rates in particular, volatility is linked to revenues. With banks blaming low volatility for their moribund fixed income sales and trading businesses in 2012 and 2013, a more volatile environment should - in theory - be welcome.
There will always be curmudgeons: "It's going to be a much harder year," says the head of one fixed income search boutique, "I see very little growth and no real reasons to be optimistic about hiring."
However, there are also some genuine optimists. “There’s a better horizon for hiring than there’s been for some time," says Oliver Rolfe, managing director at equities-focused Spartan Partnership. "The market has stabilized to a degree and there’s a feeling that things are likely to get better."
Andy Pringle, director at M&A-focused recruiter Circle Square consulting, is more exuberant still. "The market is about to absolutely explode," he told us. "There's a real disparity between supply and demand [for staff]."
2014 was the year of banking fines. $65bn in penalties and fines were paid globally, 40% more than in 2013. That level of retribution will not go unnoticed by banks. JPMorgan, Deutsche Bank, Citigroup, and HSBC have already been strengthening their risk and control functions. Control hiring is likely to continue as banks seek to make their businesses immune to fines in future.
For a long time. the lack of clarity around finance regulations was cited as a reason why banks weren't recruiting - especially for front office sales and trading jobs. Now, however, the Volcker Rule is a reality (even if there are disputes about its implementation), Dodd Frank is well on the way to implementation and MiFID II is on the horizon for January 2017. Regulation remains burdensome. but it has become a fact of life. Banks are learning to live alongside it, rather than putting everything on hold whilst waiting to see what's coming next.
Recruiters are also excited about the arrival of new entrants in London. Rolfe said new players (which he declined to name) are likely to create 10s of jobs in the equities market in 2015. As we reported last year, US high frequency traders have jobs going in the City. So do US distressed debt hedge funds.
Pringle says banks spent a lot of 2014 humming and hawing about hiring in their investment banking divisions (IBD). In 2015, they won't have that luxury. European investment banking revenue reached $20.8bn in 2014 according to information provider Dealogic. This was its highest level since 2008. European M&A revenues were at their highest level since 2011.
In 2015, Pringle predicts banks will be urgently forced to recruit. - Some M&A and ECM teams are seriously under-staffed and the revenue rebound looks set to endure. "Banks have been waiting to see that they can sustain the deal-flow. They now have a sustained level of work and a shortage of staff - there are teams with four analysts, two vice presidents and no one in between. This will be the year that gaps at the junior end really need to be addressed."
In IBD, Pringle says banks are also being struck by staff shortages. Juniors are leaving banking to work in boutiques, hedge funds, private equity, entrepreneurship and the technology industry. In their increasing desperation to hire, banks which previously insisted they would only hire recruit identikit juniors from rival firms are being forced to look further afield. Newly qualified accountants are back in vogue and there are rumours of banks hiring from law firms. Pringle predicts that banks will cast their nets further and further afield as the year progresses.
It's not just M&A where banks have been scraping along with half teams. The same has been happening in FX, where 30+ traders have been suspended following investigations into FX rigging. "Banks have been trying to cope with their shortage of spot traders by shifting further onto e-platforms and asking emerging markets traders to step in and cover G-10 books," says one senior FX headhunter, speaking off the record. "G10 teams have been patched together. This was fine as long as trading volumes were muted, but if 2015 is a strong year banks will struggle with what they have."
Recruitment firm Morgan McKinley calculated that there was an average of 1.2 candidates chasing each new finance job in the City in December 2014. In December 2011, the comparable figure was 3.9.
2015 should, in theory, be a good year if you're a financial technologist. As Bank of America CEO Brian Moynihan noted in December, banks are now having to spend more and more on technology if they want to be competitive in the long term. This should create technology roles in banks, although there are signs that technology pay is being squeezed and that technology spending is shifting to third party providers whose solutions are more cost-effective.
The European Union's bonus cap is now in place. Following clarification from the European Banking Authority in November, it's now clear-ish how the cap will work. - Banks will sidestep it by offering 'role-related pay' and this role-related pay must be constant and attached to the job, rather than to the person (and his/her performance). Last year, there were suggestions that senior bankers were waiting to see how the EU rules would pan out before they switched jobs. Now they know.
Although fixed income headhunters are the least optimistic of the lot, they are at least optimistic that second tier banks will continue to pick up top tier cast-offs. In this case, they define the second tier as 'Japanese banks,' 'Canadian banks' and Unicredit, all of which are taking this opportunity to bolster their fixed income sales and trading businesses.
With LIBOR and FX fixing consigned to 2012-2014, 2015 is hopefully a year in which banks can return to business (and hiring) as usual without firefighting revelations of scandalous behaviours past. At least, this is the theory.
As volatility returns and investment decisions become more complex, banks will need to hire some more research and strategy staff predicts Russell Clarke, partner at FigTree search. "Investors are going to need more information if they're to make informed decisions," he predicts. Overall, however, Clarke is one of the pessimists: "There's a lot of doubt in the markets. I don't think 2015 will be easy at all," he says.