Last week, U.S. investment banks lifted their skirts to display what happened beneath during the three months to September. Based upon those third quarter results, this is where we'd suggest they might be hiring in the final three months of this year - or, if not, where their hiring plans will be focused for early 2015.
Banks' foreign exchange traders are living beneath the long, long shadow of fines related to FX manipulation in their murky pasts. JPMorgan alone set aside another $1bn in legal reserves during the third quarter. UBS has warned that it could face 'material' fines for its role in the affair.
This has not prevented FX sales and trading revenues from making a comeback. Ruth Porat, chief financial officer at Morgan Stanley, said last week that, "macro revenues were up significantly this quarter, most notably in foreign exchange which benefited from improved market conditions with higher volatility." JPMorgan said its currencies business benefited from, "divergence across global monetary policies." Mike Corbat, Citi's CEO, said FX was strong in Q3. And Bank of America attributed its 11% increase in fixed income currencies and commodities (FICC) revenues to "the increased volatility that we saw during the month of September."
The sheen has disappeared a little from M&A and equity capital markets (ECM) revenues over the past week. Suddenly the global economy isn't quite so robust and equities markets aren't nearly so invincible. While the resultant volatility may be good news for fixed income revenues, it's less good news for M&A and ECM revenues, which need executives in large companies to feel secure about the future. $573bn of M&A deals have been cancelled so far in 2014 according to Dealogic, the highest level of cancellations since 2008.
Nonetheless, U.S. banks were bullish about deal pipelines during last week's calls. Harvey Schwartz, CFO of Goldman Sachs, said Goldman's combined deal backlog is the "highest it's been since 2007" and the pipeline is strong across M&A, ECM, and debt capital markets (DCM). Citi too said it's M&A pipeline is strong. Morgan Stanley said its "investment banking pipeline remains healthy," but cautioned that it might be affected by "ongoing market volatility" if that volatility persists.
Finally, following its cyber-security scare, JPMorgan has announced that it's doubling its annual spending on cyber-security, from $250m to $500m,
No other bank has made so public a commitment to increased spending, but no other bank can afford to ignore JPMorgan's plight. Cyber-security will almost certainly be one of the hottest non-front office banking jobs of 2015.