Should you fear the final months of this year? After all, they're supposed to be the time that Brexit-related layoffs start seriously manifesting themselves in London. They're also when banks' cost cutting efforts can be expected to step- up ahead of bonus season. And yet, despite ominous noises from both Deutsche Bank and Credit Suisse, headhunters say all is peaceable: cuts are happening across the industry, but they're a low-level background noise rather than a tumultuous roar.
"Cuts are just going on constantly," says the head of one London markets search boutique, speaking on condition of anonymity. "There's nothing out of the ordinary happening now, no more cuts than before." M&A headhunters are equally sanguine: "There's a little trickle from every bank," says one. "It's so minor it's almost like it's not happening." Another says banks will certainly, "trim the fat" this year, but there's nothing yet to suggest that the trimming will be any more savage than it's been every year in the recent past.
Layoffs, in other words, are a fact of banking life. There's no sign yet that conditions are about to worsen across the industry as a whole. Nor do revenues appear to justify it: EMEA M&A revenues are $4bn year-to-date according to Dealogic, down from $4.5bn last year. An 11% drop is reason to reassess, not to do anything drastic.
This isn't to say that the two banks in greatest need of cost cutting won't do so more vigorously than the rest. Both Deutsche Bank and Credit Suisse have made ominous noises about layoffs in recent days. Financial News reports this morning that Credit Suisse sent a memo to staff in its investment banking and capital markets division in early September announcing a consultation period on potential job cuts. John Cryan, Deutsche's CEO, also sent a public message to staff today warning that, "the business environment is challenging," that, "too many different people are busy doing the same work as each other", and that Deutsche still isn't "where it wants to be" and has, "no time to waste".
As the chart below shows, Deutsche and Credit Suisse - and Credit Suisse especially - needed to cut costs at the end of the first half of 2016. Both banks have cost-cutting plans tabled: Credit Suisse is cutting CHF1.7bn across the bank this year and Deutsche is in the process of taking out 9,000 jobs across the bank as part of strategy 2020. Cuts at either bank are nothing new and are more likely to take place in markets businesses than in IBD. Credit Suisse's M&A bankers can actually congratulate themselves this year - the bank has risen from 9th to 2nd in the EMEA league tables according to Dealogic. Accordingly, insiders say layoffs will be about "pruning" rather than hacking.
For the moment, recruiters seem optimistic. "We feel like the market is picking up a bit," says Jack Spraggs, M&A and corporate finance recruiter at Circle Square. "The summer was quieter than usual because of Brexit and a lot of people told us they'd reevaluate from September." Another corporate finance headhunter agrees: "Things are picking," he tells us. "There's a lot more positivity now than there was post-Brexit. It almost feels like business as usual."
Photo: Martin Barraud, Getty