Are you going to lose your banking job before 2018 is out? Late-in-the-year redundancies are always a risk as banks indulge in their inevitable pre-bonus cuts, but this year's layoffs could be particularly harsh as banks squeeze European costs to cover the expense of Brexit and squeeze front office costs to pay for technologists to automate jobs away in the future.
Which jobs are most likely to go? For this, it helps to look at the charts for comparative operating costs as a proportion of income that were put together by research firm Tricumen at the end of the second quarter. Tricumen has yet to release its third quarter charts, but in many cases it's a case of plus ça change. We've posted the charts at the bottom of this page, but here are the quick takeaways.
1. Deutsche Bank, equities and fixed income staff should really be worried
At the end of the first half of 2018, Tricumen said that Deutsche Bank's equities trading division and its fixed income trading division had the worst cost-income ratios of comparable businesses across every big bank.
Things might have changed. After all, CEO Christian Sewing cut 1,450 staff across the bank in the third quarter. Then again, Deutsche Bank also ended the third quarter with only 101 fewer front office bankers in its corporate and investment bank than it began - a reduction of less than 1%. This could be because it hired a lot of new graduates to replace all the senior bankers it let go, which should be good for costs, but it doesn't bode well that costs consumed 95% of revenues at Deutsche's corporate and investment bank in Q3, and 92% in the first nine months of the year.
If anyone is going to lose their jobs before the end of 2018, it therefore probably should be Deutsche Bank's salespeople and traders. The good news is that Sewing has repeatedly promised that front office layoffs are over and the front office restructuring is "complete". There may be a stay of execution.
2. Investment bankers at UBS, Credit Suisse and BNP Paribas should probably be worried
Looking back at banks' performance in the six months to June 2018, Tricumen highlighted the cost ratios in the 'banking' divisions of the Swiss banks and BNP Paribas. Tricumen defines banking as debt capital markets bonds and loans, securitisation, equity capital markets, and M&A.
BNP Paribas and Credit Suisse are reporting their third quarter results this week, but UBS already reported last week. It had an excellent third quarter in M&A, but a less impressive three months in equity capital markets and debt capital markets. In light of the historically high cost base, UBS's investment bankers might be exposed, particularly following the appointment of new heads of the investment bank (Robert Karofsky and Piero Novelli) following the recent departure of Andrea Orcel. Karofsky and Novelli might use the opportunity to shake things up.
3. Everyone at SocGen needs to watch their backs
SocGen will report its third quarter results on November 8th. Employees at its corporate and investment bank (CIB) need to hope that revenues have increased more than at - say - Deutsche Bank. At the end of the second quarter, Tricumen put SocGen behind the pack for cost efficiency in every single area of its investment bank. It probably doesn't help that many of SocGen's CIB staff are in Paris, where it's hard to let people go - unless they get a very handsome redundancy payment to see them on their way.
Operating cost/income, banking, Q318
Operating cost/income, fixed income currencies and commodities, Q318
Operating cost/income, equities, Q318
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