Most big banks have now reported their second quarter results and discussed their strategic priorities for the rest of this year. So, who's hiring and who's cutting? And where are they doing it? This is what you need to know.
Bank of America didn't give much away about its hiring plans when it presented its second quarter results last month. The U.S. bank has been performing well, but doesn't have any special plans to recruit for particular areas of the front office of its investment bank. Indeed, across the group as a whole it's still cutting costs at a rate of $100m a year. Nonetheless, expect ongoing heavy investment in technology, which CEO Brian Moynihan says is being deployed to aid the bank's sales teams: "We used an artificial intelligence to prioritize their work in terms of targeting their efforts."
BAML is also expected to hire in Dublin, although this may not come to fruition until 2018. The bank currently has 700 staff in the Irish capital but says it will "definitely have more" after choosing Dublin for its European base after Brexit. BAML says the Dublin will be populated both by people moving from London and by hires on the ground. In the U.S., hiring is also happening in Chicago, where the bank is constructing a new 51-story office tower. Again, however, the new hires may not be immediate: hundreds are expected in the coming years.
The real question at Barclays this summer is the longevity of CEO Jes Staley. At news emerges of an interview with the Financial Conduct Authority over his pursuit of a whistleblower, calls are mounting for Staley to go. Staley himself has given no indication of leaving, however. Everyone at Barclays investment bank will be hoping he stays. If not, Barclays could be in for it's third CEO in three years.
More promisingly, Staley said last week that the "restructuring is over" at Barclays. This is good, but the investment bank is still generating a return on equity that's less than the cost of capital, so further tweaks seem inevitable. In particular, the bank indicated last week that it plans to reallocate capital towards higher return sales and trading businesses which are doing well (eg. credit trading). Overall, Barclays is said to be in the process of adding 50-100 people to its investment bank, although no mention was made of this when the bank discussed its results and strategy last week. By July, Barclays had already hired 20 people for its London equities business. Problems remain in Barclays' U.S. macro trading business and CEO Jes Staley said last week that the bank will, "get these corrected". The bank already hired in Robert Tzucker from BNP Paribas as its head of U.S. inflation trading in May.
Like most banks, Barclays is pursuing "efficiencies" to pay for "strategic investments in technology." So expect more tech hiring too.
Citi's investment bankers had an excellent first half to the year, revenues were up 81% in equity capital markets in the first six months and up around 20% in M&A and ECM. In the call accompanying the bank's results, CFO John Gerspach said "incentive compensation" (AKA bonuses), has increased. Citi's investment bankers will surely be the beneficiaries.
Rather than investment banking, however, any hiring at Citi is more likely to happen in offices where staff don't cost much. Like Jes Staley at Barclays, Citi CEO Mike Corbat proclaimed that restructuring is over, only to be contradicted by the bank's strategy statements. - Citi hasn't finished cost cutting in the institutional clients group that houses its investment bank and markets business. During its recent investor day, Citi declared its intention of shaving another 70 basis points off expenses in the ICG, partly by shifting more staff to "low cost locations." Expect more recruitment in the likes of India and Belfast, therefore. Citi has also chosen Frankfurt as it's post-Brexit hub, so expect some hiring there too.
Lastly, there's a possibility that Murray Roos might still add a few more people to Citi's equities business. There have been some big exits in equities and Citi aspires to rank 5th globally for the business, but currently ranks seventh. Expect a focus on prime brokerage.
If there's one thing to avoid at Credit Suisse now, it's contract jobs. The Swiss bank has cut 4,310 contractors over the past year and remains focused on culling non-permanent staff as it attempts to cut costs. In the global markets division, Credit Suisse wants to cut costs to CHF4.8bn by 2018. In the first half of this year, costs in the division stood at CHF2.5bn, suggesting there's still some way to go. The bank is also trimming headcount in Asia as it pursues a 10% to 15% return on capital in that business.
If there's a bright spot at Credit Suisse, however, it's equities sales and trading. Here, the bank has big hopes after hiring Mike Stewart from UBS. CEO Tidjane Thiam suggested last week that equities could pick up from credit when the credit cycle turns. However, Credit Suisse's credit business is currently twice as big as its equities business, suggesting Stewart (who's already been hiring frantically) has some work to do.
Deutsche Bank is still cutting costs (albeit not compensation - yet), but it's got a problem to the extent that revenues are falling almost as fast as it takes them out. Costs accounted for 82.8% of revenues at Deutsche's corporate and investment bank in the first half of 2017. This was down from 83.3% in the first half of 2016 - a drop, but not a big one. Technology remains a focus: CEO John Cryan said last week that Deutsche still has 33 operating systems and that it wants to cut these to four by 2020.
Nonetheless, Deutsche insisted earlier this year that it was back in growth mode. Like Goldman, it wants to focus on growing its corporate client business. Deutsche has also said it wants to "deepen" its M&A and ECM relationships. In the call accompanying the bank's second quarter results, Cryan said the bank needs more in the way of "specialist sales and distribution" people for its equities business, and less in the way of voice traders.
There's also the possibility for giant upheaval towards the end of this year as Deutsche Bank gears up to move jobs from London because of Brexit. Although the German bank has just committed to a new London office with space for 5,000 of its 7,000 London employees, Bloomberg reports today that Deutsche is planning to shift 4,000 people to Berlin and Frankfurt soon.
Goldman Sachs has got problems. The bank's sales and trading business under-performed the entire market in the second quarter, and this wasn't a one-off: Goldman also struggled in the first quarter when it got on the wrong side of the "Trump trade."
The firm knows it has work to do and has identified its issues. During the call accompanying Goldman's Q2 results, CFO Marty Chavez said the firm was already looking at ways of bolstering its corporate client base in order to create more stable fixed income trading revenues.
Credit Suisse analyst Susan Roth Katzke suggests Goldman is going several steps further. After meeting with the firm's senior executives, Katzke claims Goldman is also: building out the cash credit trading franchise, building out its lending and debt capital markets business, investing in emerging markets and looking at building out its treasury and cash management businesses.
While this is going on, Goldman's under-performing macro desks, which historically focused on hedge fund clients, look a bit vulnerable. However, Chavez said last week that Goldman's done with headcount cuts.
While other banks say they've finished cost cutting, J.P. Morgan really has. Long may this last - profits at the corporate and investment bank fell 25% year-on-year in the second quarter.
In the call accompanying the bank's second quarter results, CFO Marianne Lake said the bank added 7% to overall expenses in the second quarter as it continued to, "execute on...investments in bankers and technology." Further expense growth is expected.
J.P. Morgan said previously that it wants to add 200 people in the Middle East and Africa this year, investment bankers included. Prime brokerage is a favourite area for investment at J.P. Morgan, so too is equities. As we reported earlier this week, J.P. Morgan's top quants have also developed a dangerous machine learning algorithm that could yet do away with many of the bank's human equities traders.
Despite having an excellent year in sales and trading, Morgan Stanley remains engrossed in cutting costs. The bank is ensconced in "project streamline", an initiative launched last year which includes using robotic process automation” to consolidate tech support." CFO Jonathan Pruzan said this will be the bank's focus for the remainder of 2017 and that the bank is on track to complete the programme by early next year. Despite the cost cutting initiative, non-compensation costs at the bank are up about $300m this year as technology costs increase.
Like Deutsche and Barclays, UBS has theoretically finished cutting costs in its investment bank. IB CEO Andrea Orcel said cost cutting was over last October. The cost revenue ratio in UBS's investment bank was 78% in the first half of 2017 versus a target for the business of 70% to 80%. However, new CFO Kirt Gardner told investors last week that UBS as a whole is now "in the last mile" of its cost reduction programme and that there are no plans to implement a new one next year. Even so, rationalization isn't exactly over: Gardner said UBS is constantly looking for opportunities to, "implement automation robotics and digitization." It's also still keen on the concept of outsourcing operations functions, as described by CEO Sergio Ermotti in the past.
If UBS is hiring anywhere, it's likely to be in technology. It's also likely to be in China, where the bank recently achieved a private fund management license that will allow it to offer onshore investment products to Chinese institutional and high net worth investors. Less pressingly, UBS also remains interested in hiring "good" M&A bankers and has been quietly rebuilding its macro trading business on the side.