Where don't you want to work in 2017? Try M&A, U.S, European and Asian equities, or FX. So says the latest capital markets pulse from Deutsche's European banking analysts.
The pulse uses trading volumes, primary revenues and spreads to provide a snapshot of the health of banks' major businesses compared to the preceding quarter and the same quarter one year earlier. If you work in M&A, equities or FX, 2017 doesn't look good on either measure.
Year-on-year, Deutsche's pulse is down around 20% for U.S. equities, by more than 10% for European equities, and by around 5% for Asian equities. Conditions for equities businesses everywhere have deteriorated compared to the three months before Christmas. U.S. equities desks, especially, are looking famished. Deutsche's analysts don't see any upturn soon: "Equities is likely to remain a drag given muted volatility and client activity."
M&A bankers are also having a bad year. Banks like Morgan Stanley insist their M&A pipelines are strong, but don't need to be told that pipelines aren't the same as active deals. Deutsche Bank's M&A pulse is down nearly 10% year-on-year and by over 20% quarter-on-quarter. As we reported last week, UBS has been letting go of senior investment bankers in the UK and Morgan Stanley has caused upset by slashing its M&A bonus pool for 2016. Bonuses are usually paid with an eye to retention, so - pipeline or not - the implication could be that Morgan Stanley is bearish on the prospects for M&A this year.
FX traders also lose out on both measures. Year-on-year, Deutsche's FX pulse is down over 10%. Quarter-on-quarter it's down around 5%.
There aren't many human beings trading FX now anyway, but those that are may want to watch their backs.
If 2017 has started unequivocally badly in equities, FX, and M&A, it's started unequivocally well for anyone in high yield debt capital markets (DCM). Here, Deutsche's index is up a huge 341% year-on-year and 59% quarter-on-quarter. You seemingly can't go wrong in a high yield origination team right now.
Equity capital markets (ECM) bankers are also doing well compared to last year and things are looking up for European rates desks. Deutsche's analysts point out that U.S. rates desks have done less well following a decline in U.S. rates volatility after December's rate hike. However, volumes and volatility are expected to pick up again as the year progresses if the Fed hikes rates again. When this happens, Deutsche says banks like Barclays and BNP Paribas - which have strong rates franchises - will be especially well placed.
Deutsche's latest pulse comes after J.P. Morgan's analysts said the German bank is likely to generate slower than expected revenues this year. Deutsche has been cutting staff in its own equities business and is expected to cut fixed income sales staff this week.