Recruitment agencies reflect on bumper time
Christmas parties thrown by financial services headhunters are likely to be lavish affairs: this has been the best year for investment banking recruitment since 2000. Though the industry is in the mood for celebrating, it might be minded to keep at least some of the Krug on ice.
Dee Symons, co-head of the global banking practice at Russell Reynolds, said: "From a financial services hiring perspective 2004 has been awesome, wonderful. It was an excellent year for us and an excellent year for most other search firms, too."
For the first time since 2000 the investment banking industry has ended the year with significantly more staff. Banks have been adding to their employees rather than just upgrading existing people.
Studies confirm the trend. City of London employment rose by 4,000 in 2004, according to the CEBR research consultancy. The US Bureau of Labor Statistics shows staff numbers in the US securities industry rising 27,000 between January and October. And Morgan McKinley, a UK recruitment company, estimated City vacancies in October 2004 were up 100% on 2003.
The accolade for the year's most voracious hirer goes to Barclays Capital of the UK. It added 2,000 people during 2004 - 1,200 of whom were in London. The hiring spree will be matched next year, confirmed Ann Connolly, head of global recruitment at the bank. She said: "We aim to become a premier European investment bank ranked in the top five in each business area we participate, in each region globally."
Like Barclays Capital, other second-tier players spent the year adding clout. Société Générale recruited across Europe after scaling back its non-French operations in 2002. HSBC upgraded its investment banking operations, while Bank of America hired about 70 people to its European debt business.
Mike Clarke, head of international recruitment at Bank of America, said: "We haven't just thrown people at the business, we've grown in key areas. We have been investing steadily in a number of strategic priority areas and we will continue to do so at our own pace."
Clarke said most of Bank of America's European hires were destined for credit sales and trading, interest rate sales and trading, foreign exchange and the debt side of the financial institutions group. Debt hiring generally in 2004 was concentrated among a small number of second-tier banks, said Lee Thacker, a fixed-income specialist at Highland Partners, an executive search firm.
Across the market, recruiting was not limited to the second tier. The population of JP Morgan's investment banking arm soared nearly 18%, bolstered by its merger with Bank One. Between January and the announcement of third-quarter results, Goldman Sachs, Merrill Lynch, Morgan Stanley, UBS and Credit Suisse First Boston together added more than 6,400 staff globally.
Lower-cost junior hires, at analyst and associate level, accounted for much of the increase. Employee numbers also grew in the third quarter when the graduate and MBA recruits arrived. In January, a survey by the UK Association of Graduate Recruiters found investment banks were planning to recruit nearly 50% more graduates than in 2003.
Trainees who managed to cling on to their jobs in the downturn of 2001 and 2002 were also in demand this year, particularly in equities and corporate finance where banks sought people with two or three years' experience. Ian Jermyn, a recruitment industry analyst at Baird, the US investment bank and asset manager, said juniors were cut too deeply during the downturn.
Recruiters such as Robert Walters, which specialises in junior level posts, did particularly well as a result. At a more senior level, hires were frequently deal originators, particularly in continental Europe. Citigroup, Merrill Lynch, Lehman Brothers and CSFB hired in Germany, with CSFB lifting four German managing directors from Dresdner Kleinwort Wasserstein in July. DrKW, Citigroup and Mediobanca hired senior staff in Paris while CSFB, ABN Amro and SG did the same in Milan.
Other areas also benefited from the robust conditions of 2004, including compliance, commodities sales and trading, UK corporate broking, leveraged finance, and equity derivatives. There was such a rush on financial controllers, the accountants of the investment banking industry, that recruitment firms said they were forced to search as far afield as Canada and South Africa for newly qualified staff.
Nevertheless, the year is ending on a more subdued note. In November the CEBR downgraded its forecast for City jobs growth from 2.6% to 1.5% for 2004, blaming weak stock markets, falling bond prices, and poor M&A.
Simon Hall, a partner in the financial services practice of Heidrick & Struggles in London, said the appetite for additional hires had waned: "At the beginning of the year banks tended towards the view that we were in a significant period of recovery. That has proven not to be the case."
History suggests exuberance can quickly turn to dejection. In 2001, Philippa Rose, founder of the Rose Partnership, a firm of niche headhunters, revelled in the good times with an alternative rendition of Abba's Money, Money, Money at a party. Within two years the firm's 1.5m (€2.1m) annual profits had turned to losses of 420,000.
