Banking results mixed, but hiring continues
Record profits at Lehman Brothers; a shaky quarter for Goldman Sachs and Bear Stearns; and an ever-widening gulf between financial services jobs and candidates.
It's been a confusing week for investment banking trend-guessers. Lehman Brothers unveiled an astonishing performance, with the biggest quarterly profit since its inception 157 years ago. Goldman Sachs announced a mere 1% increase in quarterly net income and Bear Stearns saw profits plummet by 10% - or 33% if a one-off write down is included. Both were affected by problems in the US subprime mortgage market.
Meanwhile, the chasm between jobseekers and job numbers continues to widen. The ever-upbeat monthly survey of financial services hiring trends by recruitment firm Morgan McKinley suggests there are nearly 1,000 more jobs than candidates in London, with jobs up 4% month on month and 20% year on year in May.
The job market typically lags financial performance by more than a year, so banking wobbles are unlikely to affect hiring any time soon; Goldman added nearly 2,000 people between February and May, for example. And many businesses are still doing well: investment banking net revenues at Goldman were up 13% on the second quarter of 2006.
However, a senior banker at one US boutique in London tells us it's not so much a question of how long they'll go on, but how things will go wrong: "This can't go on for ever."
Ogres are already at the banquet. This week's fall in European and US bond markets doesn't look pretty. And the US subprime problems that derailed Goldman and Lehman Brothers haven't played out yet - Goldman CFO David Viniar reportedly predicts "there will be more pain felt'' from the area yet.
Lehman, at least, purports to be well placed to ride out the downturn when it comes. Chief financial officer Chris O'Meara says: "We've developed the culture and the trust with our employees that lets us reduce pay when times are tough... So we can avoid reducing payroll.''
It's a reminder that even if jobs may be secure for the time being, bonuses are not.
