If you're a glass half full kind of person, everything is great. Investment banks had an unusually good second quarter and capital markets are on a roll, with debt capital markets revenues looking particularly effervescent. In some areas, banks are even starting to think they've over-fired. Soon, banks will start hiring again in earnest.
If you're a glass half empty kind of person, however, recent months are merely the froth on the filthy puddle: yes, it all looks good on the surface, but underneath things are just as torpid as ever.
The true state of affairs for banks in Europe will become clearer tomorrow when Deutsche Bank, UBS, Barclays, and SocGen are all due to report their results. In the meantime, two very different camps are emerging when it comes to the likelihood that banks will start hiring vigorously in 2013.
The 'jobs-back-soon' brigade is led by headhunters and recruiters, who claim they've seen signs pointing to a hiring rebirth - especially in areas like cash equities, where banks cut staff heavily in 2011 and 2012 and revenues are suddenly resurgent.
"Equity researchers are completely overworked," the head of one equity research headhunting firm told us. "People who used to cover six stocks with an associate helping them, are now covering 12 without support."
All it takes for hiring to come back is a slight increase in candidates' optimism, said headhunters. Optimistic candidates will take headhunters' calls, headhunters will persuade these candidates to take new jobs, and so the merry-go-round resumes. Deutsche Bank is presented as a case in point. The German bank is said by recruiters to have lost "six-to-eight" equity researchers in recent weeks across oils, insurance and banking (including Carlos Berastain - a banking analyst based in Spain who is said to have gone to Santander and is no longer on Deutsche's system, and Robin Buckley - an insurance analyst who left Deutsche at the end of May according to a colleague and is said to be going to Fidelity, and James Isenwater, a consumer goods analyst whose destination is unknown.)
"Deutsche Bank have got offers out to replace these people," said the equity research headhunter. "You're going to see some big announcements from them in the next few weeks." Deutsche declined to comment.
Optimism is being fanned by hopes that equity capital markets activity will be strong in the third quarter: research by Dealogic and Financial News found that September is the best month for IPOs. As revenues come back, banks that have been making do with juniors are going to need senior staff again, predict headhunters: "Clients will want people with gravitas. They're not going to accept dealing with a junior VP any more. You're going to see a lot of hiring of MDs," said one headhunter, speaking on condition of anonymity.
Naysayers say optimistic recruiters are wrong. And worryingly, naysayers include banking analysts with a more objective view of the markets.
"Banks have had one good quarter, but that means nothing," said Chris Wheeler, a veteran banking analyst at Mediobanca.
The world changed on May 22nd 2013, said Wheeler. Then, Ben Bernanke said he was thinking of tapering the Fed's purchases of U.S. government bonds, implying that interest rates in the U.S would rise. Resurgent dent and equity capital markets revenues have suffered as a result. "Debt and equity capital markets revenues collapsed in June and July," said Wheeler. "If interest rates are going to rise at the long end of the curve, banks are going to have trouble selling the debt and equity products they've originated."
Figures from Dealogic confirm the problem: 2013 year started on a tear, but has slowed to a trudge. Although it only took 205 days for banks to make $40bn in global investment banking revenues (down from 222 days in 2012), it took them 61 days to move from $30bn to $40bn - the longest amount of time since 2009. Banks have been vocalizing the issue - Ruth Porat, CFO of Morgan Stanley recently said companies were starting 'reassess the timing' for capital markets issuance.
The bottom has already fallen out of the market, said Wheeler. Plus, many banks are still cutting costs: "You've got Deutsche trying to shed costs, Credit Suisse trying to shed costs and Barclays cutting. If hiring is back, it's news to me."