Now that Easter’s passed, this should be the moment hiring heats up as banks pursue strategic hiring priorities for 2017. – Except that most banks don’t seem to have any strategic hiring priorities for 2017 (or at least none that they’re talking of) and in London the inclination to staff-up is being tempered by both Brexit and the coming General Election.
To the extent that banking executives have offered any indication of their headcount intentions for the next six months during recent results calls, we’ve highlighted them below. This is what’s coming up for your job, according to the C-Suite.
Bank of America: Been “making a lot of investments” in global markets, but nothing firm in the pipe
Bank of America CFO Paul Donofrio said the bank has been, “making a lot of investments,” in global markets, “across equity, across macro.” However, it was BofA’s credit trading business that really drove its fixed income results in the first quarter and there was no mention of further investments here.
Donofrio stressed that the bank’s trading success came from being all things to all clients in all markets (“…it’s [our] impressive products, it’s [our significant presence and scale in every major market around the world…”]. BofA isn’t going to follow Barclays and specialize in particular geographies, therefore.
Barclays: 2,000 new technology jobs in the UK over the next three years
The headline at Barclays was the bank’s intention to hire 2,000 technology staff in the UK between now and mid-2020. 750 have already been recruited. Exciting! Except, don’t imagine that all these technologists are going to be supporting traders in London. Staley said the 750 existing hires are sitting in the bank’s technology centres in, “Radbroke, Northampton and Glasgow.”
More broadly, Barclays’ fixed income business didn’t do well last quarter. Staley declared himself “disappointed” with the performance of the U.S. rates desk, suggesting Barclays could do with some better traders here (although Staley didn’t say so).
Citigroup: No big plans but earlier equities investments (and hiring) now coming to fruition
Citi spent much of 2016 rebuilding its equities franchise. Murray Roos and Dan Keegan were appointed global heads of equities in May and Armando Diaz from Millennium was brought in to run cash equities trading globally. Roos, who joined in 2015, also made a succession of hires before and after his promotion.
Citi CFO John Gerspach, said this investment in equities is now showing results, suggesting Citi’s equities build out is probably over. Less promisingly, both Gerspach and CEO Michael Corbat talked down Citi’s excellent performance in debt and equity capital markets in the first quarter, stressing that the revenue numbers only looked good compared to 2016 because the first quarter of 2016 was so dire. – So don’t expect any hiring there.
Credit Suisse: Dumping contractors, protecting full time staff, hiring in compliance, “right-sizing” in sales and trading
Credit Suisse is in the process of cutting costs in its global markets division from $5.3bn a year in 2016 to $4.8bn a year soon. Even so, it added 70 people in global markets in the first quarter, and 120 in its investment banking and capital markets division over the same period.
Credit Suisse CEO Tidjane Thiam said the bank continues to reduce its “fixed cost base,” but that his intention is to cut contractors and consultants whilst “protecting full time employees” as much as possible and that his “philosophy is to try and minimize job losses.” Thiam also said that in the past two years the bank has “almost doubled” the number of people in its compliance function.
Compliance aside, hiring therefore looks unlikely at the Swiss bank. Thiam said he’s “cautious in the short term” and that “political uncertainties” weighed on client volumes last month. More ominously, it’s possible that there could be further cuts in both fixed income and equities trading. Thiam said the equities business has a “right-sizing issue.” Similarly, he said fixed income has a similar requirement because, “the environment for rates has changed,” and that lower revenues in Asia seemed to be “a new normal.”
Thiam said global markets cuts are being made on the basis of a detailed examination of each business based upon returns. He added that Credit Suisse needs to allocate capital more efficiently: opportunities to generate returns of 50% to 80% are being missed, seemingly because of capital allocation problems.
Deutsche Bank: Hiring in compliance, “internalizing” contractors, regretting the decision to pull back from securitized trading in the U.S.
Deutsche continues to implement its new strategy, announced in March, of focusing on corporate rather than institutional clients. It wants to “deepen” relationships in M&A and equity capital markets this year, and to recapture market share in equities sales and trading.
Little was said of this when Deutsche presented its first quarter results though. Instead, CEO John Cryan said Deutsche had made around 370 net hires in compliance and financial crime and “internalized” (ie. converted into full time staff members) 200 contractors. More such internalization is planned.
Deutsche CFO Marcus Schenck said the German bank suffered as a result of its decision to pull out of the U.S. securitized trading market, which had an excellent quarter. Schenck also said that April at Deutsche had been weaker than March – and more ominously – weaker than April last year. Even so, there are signs that Deutsche is hiring amidst complaints from current staff that it’s unfairly luring new hires with guaranteed bonuses.
Goldman Sachs: Spare “capacity,” the expense level “never feels perfect”, “constant discipline” on expenses
Goldman Sachs didn’t have a great quarter in the first three months of 2017. It cut 300 people over the period after announcing $900m in cuts last year, of which new CFO Marty Chavez indicated there are still $400m to come.
Analysts asked specifically whether Goldman planned to cut costs and headcount in response to its poor performance. Chavez said the business had already been trimmed since the end of 2012, but that the bank had a “constant discipline” to look at expenses which never feel perfect, Chavez added that Goldman has a “tremendous capacity” to serve clients as activity levels improve (indicating spare capacity now) and said that clients recognize this. Goldman’s co-president David Solomon subsequently told Bloomberg that Goldman’s business is. “levered to times when clients have a lot of conviction and one of the things that happened in the first quarter was that conviction ebbed.”
The clear expectation at Goldman is therefore that things will bounce back, and that the business will be ready for it given its current size.
J.P. Morgan: Expect technology hires. Cost cutting is over, hiring in the Middle East
J.P. Morgan didn’t say much about headcount when it presented its first quarter results. However, as we’ve noted before, cost cutting at J.P.M’s corporate and investment bank is over and the bank is focused on technology hires, especially in cyber-security. Separately, investment banking CEO Daniel Pinto said today that J.P.M plans to add 200 staff in the Middle East and North Africa, some of whom will be in the investment bank.
In revenue terms, J.P. Morgan had an excellent first quarter in equity capital markets and debt capital markets and a less good first quarter in M&A. However, don’t assume any headcount changes on the back of this. – CFO Marianne Lake said this was only relative to 2016, when M&A was “particularly strong” and capital markets were “weak.” In the past quarter, she said both were, “normalized.”
Morgan Stanley: Still executing “project streamline”, no mention of ever hiring again in fixed income
Morgan Stanley CFO Jonathan Pruzan said the bank is still executing the “roughly 200 expense initiatives” associated with the “project streamline” initiative it launched in mid-2016. These include using, “robotic process automation” to consolidate tech support and cutting back on North American data centres.
In investment banking, Pruzan echoed Citi in suggesting the excellent first quarter in equity capital markets might not last. Pruzan blamed this on European elections and policy uncertainty, which he said could affect “issuance windows”. And although Morgan Stanley had another outstanding quarter in fixed income sales and trading, CEO James Gorman said nothing about additional headcount (after Morgan Stanley cut 25% of its fixed income salespeople and traders in late 2015). Instead, the plan is, to “just keep executing; manage our expenses in the businesses where we can keep up share, pick up share in the businesses where we’re holding share, hold it,” said Gorman.
UBS: Absolutely not hiring in U.S. credit trading
UBS had already indicated its intention of hiring senior investment bankers “one at a time” and of growing its U.S. equities business. However, no mention of this was made by its senior managers as they discussed the bank’s performance in the first quarter. Instead, CEO Sergio Ermotti vehemently denied claims that the Swiss bank is rebuilding its U.S. credit trading business. If UBS is bullish about building anywhere. it seems to be in Asia Pacific wealth management, which it thinks will “provide compelling growth going forward.”