The terrible truth about the coming redundancies

4 November 2008

3 minute read

The terrible truth about the coming redundancies

It's becoming harder to find a bank that hasn't already laid off at least 10% of its staff. But with revenues still catastrophically low, headcount reductions to date could prove a pinprick compared to what's coming next. Based on average pay per head for the year so far, we've calculated how many more people each bank would need to cut in order to maintain its compensation ratio (compensation costs as a percentage of revenues) in line with 2007. The results range from the farcical (Merrill Lynch) to the disturbing (Credit Suisse), and the reassuring (Goldman and Morgan Stanley).

Merrill Lynch

Revenues Q1-Q3: 2008 - $834m; 2007 - $19,442m

Compensation costs Q1-Q3: 2008 - $11,170m; 2007 - $11,564m

Compensation ratio Q1-Q3: 2008 - 1,339%; 2007 - 59%

Headcount Q3: 2008 - 60,900; 2007 - 64,200

Average comp per head: 2008 - $183k

Layoffs over the past year: 3,300

Layoffs required to maintain compensation ratio: 58,195

Credit Suisse (investment bank only)

Revenues Q1-Q3: 2008 - CHF2,736m; 2007 - CHF16,217m

Compensation costs Q1-Q3: 2008 - CHF5,682m; 2007 - CHF8,111m

Compensation ratio Q1-Q3: 2008 - 207%; 2007 - 50%

Headcount Q3: 2008 - 21,300; 2007 - 20,399

Average comp per head: CHF266k (US$228k)

Layoffs over the past year: None; 1,000 staff added*

Layoffs required to maintain compensation ratio: 16,161

Deutsche Bank

Revenues Q1-Q3: 2008 - €6,102m; 2007 - €14,620m

Compensation costs Q1-Q3: 2008 - €3,250m; 2007 - €5,217m

Compensation ratio Q1-Q3: 2008 - 53%, 2007 - 36%

Headcount Q3: 2008 - 15,574; 2007 - 17,215

Average comp per head: 2008 - €209k

Layoffs over the past year: 1,668

Layoffs required to maintain compensation ratio: 5,130

UBS

Revenues Q1-Q3: 2008 - minus CHF21,418m; 2007 - CHF11,065m

Compensation costs Q1-Q3: 2008 - CHF4,589m; 2007 - CHF8,326m

Compensation ratio Q1-Q3: 2008 - unquantifiable; 2007 - 75.2%

Headcount Q3: 2008 - 18,901; 2007 - 22,666

Average comp per head: 2008 - CHF243k (US$208k)

Layoffs over the past year: 3,765**

Layoffs required to maintain compensation ratio: Everyone

JPMorgan (investment bank only)

Revenues Q1-Q3: 2008 - $12,516m; 2007 - $14,998m

Compensation costs Q1-Q3: 2008 - $6,535m; 2007 - $6,404m

Compensation ratio Q1-Q3: 2008 - 52%; 2007 - 43%

Headcount Q3: 2008 - 30,989; 2007 - 25,961

Average comp per head: 2008 - $211k

Layoffs over the past year: None; 5,298 staff added

Layoffs required to maintain compensation ratio: 5,647

Morgan Stanley

Revenues Q1-Q3: 2008 - $22,881m; 2007 - $28,476m

Compensation costs Q1-Q3: 2008 - $10,726m; 2007 - $13,365m

Compensation ratio Q1-Q3: 2008 - 46.9%; 2007 - 46.9%

Headcount Q3: 2008 - 46,383; 2007 - 47,713

Average comp per head: $231k

Layoffs over the past year: 1,330

Layoffs required to maintain compensation ratio: No additional layoffs required

Goldman Sachs

Revenues Q1-Q3: 2008 - $23,800m; 2007 - $35,246m

Compensation costs Q1-Q3: 2008 - $11,424m; 2007 - $16,918m

Compensation ratio Q1-Q3: 2008 - 48%; 2007 - 48%

Headcount Q3: 2008 - 32,569; 2007 - 29,905

Average comp per head: 2008 - $351k

Layoffs over the past year: None; 2,664 staff added***

Layoffs required to maintain compensation ratio: No additional layoffs required

· *Between Q1 and Q308 vs. Q1 and Q307, excluding 500 layoffs announced in October

· ** Between Q1 and Q308 vs. Q1 and Q307; excluding 1,901 layoffs announced in October

· ***Between Q1 and Q308 vs. Q1 and Q307, excluding 3,200 layoffs announced in October

AUTHORSarah Butcher

Global Editor

st
still around
5 November 2008
Credit Suisse and UBS have never made a penny outside Switzerland. hard to believe but true.
All the IB units in london and NY do, is justify executive compensation.
however, ubs makes USD 8bn. with out doing anything. just from their wealth management platform. that is actuaklly the big plus and shows where they should focus. let go what has not even worked in best times..
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Ro
Robster
5 November 2008
also, according to these calc surely you need to base staff cuts coming on Q1-Q3 2009 revenues , so shouldn't you be giving us implied or expected 09 revenues? And what are these based on? Are we assuming they will be flat on 08. Or are we just talking about Q4 08? This all seems to elementary.
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ki
killua
5 November 2008
Loved the conclusion on UBS. I dun understand these guys that keep rubbishing the articles and yet kept coming back to read and comment each time a new one is posted. Obviously the measure was not meant to be conclusive or published in an academic journal.
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Sa
Sarah, Editor, eFinancialCaree
5 November 2008
Citigroup aren't included simply because they don't break out headcount or compensation for their investment bank.
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Dh
Dhruv
4 November 2008
How can you not include 'Citigroup'?
They are the frontrunners in making people lose their jobs after Lehman Brothers.
They are also going to write off another USD 500 Billion of assets in next two years which will make their total assets to USD 1.7 trillion from USD 2.2 trillion.
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