It's turning out to be a bad year to be a high ranking investment banker in Europe. As costs are cut and capital markets deals remain low, banks are doing away with some of their most senior and expensive staff.
As the chart below shows, investment banking division (IBD) staff have been relatively immune to the axe. While front office fixed income professionals globally have had their numbers reduced by over a fifth in the past five years, IBD staff have been pruned by just six per cent over the same period. Action is now needed: in the first quarter of 2018, research firm Tricumen said that UBS, Barclays, HSBC, BNP Paribas and Credit Suisse all had an issue with high costs in their investment banking divisions.
This might be why it emerged yesterday that Credit Suisse has let go of around 26 managing directors and directors in the past five months, mostly in London. It may also explain reports of involuntary senior exits at HSBC, and UBS and Barclays - to say nothing of the pain being inflicted upon the investment banking division at Deutsche Bank.
With Barclays cutting over 100 MDs and directors in January, Credit Suisse letting go of 26 Ds and MDs of its own, and some inside Deutsche Bank talking of "carnage" in large teams like healthcare as the bank retrenches from non-core sectors, merges teams and jettisons its head of corporate finance, senior bankers at European banks are getting the fixed income treatment., If you've been used to (comparative) job security, it's going to be a shock.
Costs aren't the only issue. In ECM, revenues are also looking weak. Figures from Dealogic show EMEA announced equity capital markets deals by value at $88bn this year, down from $126bn in 2017. In debt capital markets, deals are on a par with last year. Only in M&A are they up by a healthy 82%, helped along by the likes of Comcast's $22bn bid for Sky.
The latter may help explain why, even as European banks are cutting IBD staff in Europe, U.S. banks are busy adding them. This month, Bank of America hired Larry Slaughter, the former co-head of European M&A at J.P. Morgan. In May, it hired Séverin Brizay, UBS's former head of M&A for the same region., plus an ex-UBS MD for its EMEA financial sponsors team. In February, BoFA hired the former head of Morgan Stanley's financial institutions group. The additions at BAML come after Jefferies poached two of the bank's EMEA staff as it builds its energy and natural resources division.
Investment banking headhunters say they're busy with new hires, but that there are plenty of senior staff out of the market. "Directors and managing directors are expensive, and if they're not producing now they never will," said one, speaking on condition of anonymity. "Banks are clearing out the dead wood, giving younger and smarter people a chance to move up," he added.
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