Paris bankers escape nearly unscathed

John Jessen, managing director of Frankfurt headhunter Smith & Jessen, says: "Without a shadow of a doubt, it was an awful year. Around 50% of the people in Frankfurt-based M&A and corporate finance teams have been made redundant."

In Germany, it was the domestic players that made the deepest cuts. Deutsche Bank, Dresdner Bank and Commerzbank cut thousands of staff as 2002 progressed. Redundancies were focused on overweight retail banking networks, but unprofitable wholesale divisions did not go unscathed. Headhunters say Commerzbank reduced its Frankfurt M&A team by up to 60%, and more cuts are expected in the future.

While German banks slashed staff, foreign banks operating in Frankfurt reacted to the downturn by migrating staff westward. Rolf Behrens, managing director of Banking Consult, a Frankfurt headhunter, says US banks moved M&A execution specialists to London.

Tim Zuehlke, a consultant in the equities division at Smith & Jessen, says almost all Frankfurt-based banks cut back on equities teams in 2002, with junior staff bearing the brunt of reductions.

Nevertheless, the Frankfurt job market was not without its bright spots. Zuehlke says JP Morgan hired around eight staff in equity sales and trading. Andreas Weig, a financial services headhunter in Korn/ Ferry's German office, says demand remains strong for senior bankers, particularly with origination skills.

However, Frankfurt hiring has been strongest in fixed-income sales, particularly structured-credit products. Citigroup, Lehman Brothers, Barclays Capital, UBS Warburg, CSFB and the HSBC subsidiary, Trinkaus & Burkhardt, all expanded fixed income sales forces in Germany during 2002.

Jessen says: "There was a lot of international commitment to the German market; this will continue in the future." Reflecting US banks' ongoing interest in Germany's potential, Goldman Sachs doubled its number of German-based partners from three to six during the course of the year.

Banking jobs in Milan were underpinned by the hiring activities of domestic firms. A leading Milanese headhunter says: "Hiring by domestic Italian clients was up on 2001. But hiring by international banks disintegrated."

Alberto Gavazzi, head of financial services headhunting at Russell Reynolds in Milan, says: "Italian investment banks were hiring people until June. They are not hiring any more, but they are not firing either."

However, foreign banks in Milan did fire people, particularly equity brokerage staff. Gavazzi says Dresdner Kleinwort Wasserstein, ABN Amro and Société Générale all curtailed or closed their Italian equity brokerage activities.

At the same time, as in Germany, many Milan-based execution specialists were moved to London. US banks' Italian corporate finance teams are now staffed primarily with senior bankers, relationship managers and sector coverage specialists.

Italian boutiques moved in the opposite direction. Despite a 36% drop in Italian IPO issuance in 2002, the country's corporate finance specialists added staff during the year.

Euromobiliare, Meliorbanca and Banca Intermobiliare were among those recruiting.

In Paris, hiring was less buoyant, but cuts were also less severe. Diane Segalen, a partner in Heidrick & Struggles' Paris office, says French banking teams made it through the year more or less intact.

Strict laws governing redundancies make it harder to trim staff in Paris than elsewhere in Europe. Denis Marcadet, a recruiter at Vendômes Associés in Paris, says: "If a company is dismissing people, the last teams to go will be in Paris."

As a result, Marcadet estimates that fewer than 5% of all Parisian bankers lost their jobs in 2002. But some sectors were hit harder than others. Headhunters say ABN Amro closed its Parisian equity research business during 2002; a number of other Parisian equity research teams were also made redundant.

Meanwhile, hiring in the Parisian market was centred on LBO originators and structured-product experts, especially those with credit derivatives experience. The French educational system produces derivatives specialists in abundance, but punitive taxes mean few want to work in Paris. However, by the end of the year, Marcadet at Vendômes Associés says most Parisian derivatives teams were complete.

In continental Europe as a whole, some sectors have been healthier than others. Private banking did well in Frankfurt and Milan. Gavazzi at Russell Reynolds says private banks were among the only Milanese organisations still hiring during the final months of the year.

Headhunters say CSFB, HypoVereinsbank, Deutsche Bank and UBS Warburg increased their Frankfurt-based private banking teams during the fourth quarter of 2002.

Equally, there were particular organisations that bucked the downward trend. The Spanish Banco Santander has continued to boost its equities presence in Frankfurt, Milan and Paris.

Headhunters even suggest that corporate finance hiring may improve slightly in 2003. In Frankfurt, Jessen forecasts that financial services M&A specialists will be required to restructure Germany's insurance sector and Landesbanken system.

Meanwhile, French headhunters say the utilities market continues to hold promise with deregulation set for the next few years.

Overall, however, headhunters forecast that continental European hiring will remain weak until markets pick up. But investment bankers can take solace from the fact that they are suffering less than their retail colleagues.

In Italy, Gruppo Banca Intesa plans to cut thousands of jobs from its retail network. In Germany, HypoVereinsbank, Deutsche Bank and Dresdner Bank plan to eliminate a total of 40,000 jobs in 2003. Parisian headhunters even suspect that French banks may announce domestic restructuring plans soon.