How secure are all those new jobs at BarCap anyway?
The big news today is BarCap's involvement in a new Cayman Islands vehicle, which looks to be rather lucrative for those involved, whilst simultaneously enabling the bank to mark the credit assets it shovels into the vehicle to maturity rather than to market.
Putting this aside for a moment, however, let's take another look at all those new jobs at BarCap itself. The bank's declared intention is to hire 1,000 people this year, 75% of whom it implies are
Conventional wisdom says BarCap is a good place to go: it's got Lehman's strong US franchise, plus the might of the Barclays balance sheet behind it. However, as the Wall Street Journal points out, it may not be that simple.
BarCap's record first half profits, which it says are persisting, may falter when credit conditions normalize as widely expected.
Unless equities and corporate finance quickly pick up the slack, Credit Suisse analysts predict BarCap could be left with a bloated cost base which could wipe out all its profits. Fortunately, most of its guarantees only last one year.
BarCap isn't averse to ushering staff out of the door - even while recruiting. It eliminated 1,200 jobs this year, while adding 1,000.
As evidence of BarCap's alleged fickleness, its detractors point to the 40 or so M&A bankers it was said to hire from ABN AMRO last May. The prize recruit, Jitesh Gahdia, has been on sabbatical since January, and is expected to remain absent until the end of the year. Some of the juniors hired along with him are said to have been let go.
This isn't to say things will be any easier for Nomura, the other big hirer in the wake of Lehman.
Without the strong Lehman US franchise, it faces a greater struggle than Barclays to make its global aspirations work. It also faces continuing disgruntlement in London over the guarantees paid to ex-Lehman staff.
In Nomura's favour, however, the Wall Street Journal points out that the Japanese have comparatively long time horizons. If things slow down, Nomura may therefore take its time before too-hastily pruning anyone added in 2009.
