With senior bankers queuing up to present their visions for the future at the Bank of America Merrill Lynch banking conference, now's the time to refresh your opinion about what might happen in terms of hiring and firing in investment banks in 2016.
Daniel Pinto, CEO of the corporate and investment bank at J.P. Morgan, offered several pointers on where the priorities might lie at JPM. If you aspire to work for Daniel, this is what you need to know.
Finance recruiters say they're desperately trying to find regulatory capital specialists familiar with new governmental requirements on capital allocations.
Hearing Pinto speak, this is hardly surprising. "We will allocate capital to a very granular level in the organization based on advanced Basel III requirements," said Pinto. "We allocate liquidity based on our stress factors to a very, very granular level," he emphasized. Pinto said the bank then allocates and optimizes capital on a desk-by-desk basis according to liquidity and regulatory constraints, and that it communicates these new constraints very carefully to staff.
Like most other investment banks, J.P. Morgan is culling its clients and focusing only on those who are particularly profitable. Reuters reports that one unnamed investment bank is now compelling its investment bankers 'to break out time spent on each client and product every week'. Clients that don't generate enough revenues are dropped.
J.P. Morgan seems to have something like this going on. "We do a lot of work on client planning," said Pinto yesterday, adding that it's all about "really fine tuning client profitability" and "maximizing the wallet" of particular clients.
Pinto also noted that not all the regulatory-related repricing that's due has happened yet. Europe has yet to implement "clearing" he said, and because of this J.P. Morgan is not yet at "full scale".
We assume that Pinto is referring to the European OTC swaps clearing rules which are due to be implemented in April 2016. Until that time, clearing and 'pricing specialists' will not be dispensable. 'Pricing specialists' may simply be traders, however.
Fixed income revenues at J.P. Morgan fell 11% year-on-year in the third quarter. However, Pinto said J.P. Morgan's fixed income salespeople and traders have no need to worry. "The key of success in fixed income is scale," he declared. "The other component that is important to me is to have diversification," he added. Sometimes rate trading is hot, sometimes credit, said Pinto. The message is that J.P. Morgan won't be cutting any particular trading desks because of one bad year.
Emerging market traders haven't had a good 2015, but here too Pinto was sanguine. "Emerging markets has gone through a very rough time, but, at some point, that's where the growth is going to come in the world," he said, adding, "I love the business," for those in doubt.
J.P. Morgan has been focused on improving its share of electronic equities trading since early 2014. Next year will be no different. The "electronic execution platform" is being rolled out in Europe, said Pinto. It's already two thirds rolled out in Asia and will be fully rolled on the continent by the middle of 2016. Program trading is growing too.
Credit Suisse may be pulling back from prime broking, but J.P. Morgan isn't. J.P. Morgan is forging ahead in prime broking - but only in 'synthetic prime broking' in which banks offer hedge fund clients 'synthetic' or derivatives exposure to underlying products. Pinto said J.P. Morgan already offers synthetic prime broking in Europe and plans to roll it out to the US and Asia too. Synthetic prime broking expertise will surely be in demand as a result.
Photo credit: Thomas Hawk