Eight top firms seek more investment banking job cuts - survey

Large banks are proposing to reduce their investment banking divisions in London, comprising both M&A and ECM groups, to a target of about 400 people each in the current weak markets, according to research by the headhunter Armstrong International.

The research was conducted at eight top US and European banks. Aidan Kennedy, head of research at Armstrong, said: &quotSome 400 investment bankers is the typical average being looked at by the top houses. But only Goldman Sachs and CSFB (Credit Suisse First Boston) are close to this at the moment.&quot

Armstrong spoke to HR directors and heads of investment banking about their thinking on staff numbers and redundancies, as part of its research for an annual compensation report on the sector at the end of the summer.

The firm's founder, Martin Armstrong, said: &quotWe are now moving into a real bear market. There will most likely be another 20% of job cuts across the board.&quot

Last week the downturn in investment banking business took its toll on financial results announced by Morgan Stanley, Lehman Brothers and Goldman Sachs. The latter cut another 1,000 jobs in all sectors in the second quarter alone. In the past year its headcount has fallen by almost double that as it struggles to control costs.

Some headhunters suggest that Goldman Sachs might reduce its IBD division by 20%.

One says that as many as 45% of staff in the division have been there for less than two years. It is tricky enough to work out appropriate remuneration for bankers in weak markets, say headhunters, without having also to think of sweetening the pill for those new to the business.

One headhunter says: &quotThese people are there to originate deals and are valuable. If you let them go in a messy way and the markets pick up, you may not get them back again.&quot

Investment banks are only too aware of the pitfalls of downsizing. They are looking seriously at managing expectations on remuneration, which is increasingly expected to carry a high equity component. Business heads are focusing on the levels at which they can expect employee satisfaction - or where employees see the bottom line.