2Q results round-up - where hiring should take place in the second half

Six banks have now reported their second quarter results, affording a perspective on which businesses are doing well, and where hiring really ought to take place in the second half.

In reality, however, hiring may well be muted across the front office for the rest of 2010. Banks have hired comparatively ferociously in the first six months and will probably now wait for those new hires to bed down. For example, we understand that BofA Merrill has recruited a total of 200 markets staff across EMEA, while Credit Suisse indicated today that most of the 130 new sales and trading hires it flagged in March have now arrived.

Equally, the overall outlook for the third quarter isn't great. Morgan Stanley said activity has been muted, 'across the board' in Q3, while Goldman said things improved in June, but only because May was so eerily quiet.

Nevertheless, based on 2Q results, we've broken out what's looking hottest in the front office right now.

Helpfully, Credit Suisse has also produced the following chart clarifying where it expects the market environment to improve, and where it expects to expand its own market share. Click to expand.

1) Cash equities

As shown above, Credit Suisse ranks cash equities as a major area of growth. During today's presentation it said electronic trading is expanding particularly rapidly.

Citigroup has also flagged its intention to expand in equities, while Morgan Stanley said cash equities had a strong quarter. BarCap is also known to be hiring in cash equities still, and RBS is focused on improving its equities franchise.

2) Prime Brokerage

Both Morgan Stanley and Credit Suisse flagged prime brokerage as an area of future growth. As we noted last month prime broking has been one of the hot hiring areas in London this year. This week's results suggest that should remain the case.

3) Leveraged finance

As shown above, Credit Suisse is predicting growth in leveraged finance, and says its own pipeline is, 'significantly' better than a year ago. Banks have already been building teams in anticipation of this.

4) ECM

Credit Suisse is optimistic about ECM prospects. Morgan Stanley said underwriting revenues were 'resilient.' Promisingly, Santander is even rumoured to be considering a UK listing.

Unfortunately, given big ECM hiring last year, and the lack of much to show for it so far, widespread additional hires seem unlikely.

5) M&A

Even though M&A in the UK appears to be slower than at any time since 1994, things are looking up. A rush of new takeovers is making the third quarter look more promising, with banks like Morgan Stanley and Credit Suisse reporting strong pipelines.

Uncertainty over whether these pipelines manifest as actual deals may restrain hiring until 2011, however.

6) Commodities

The outlook for commodities is more mixed. While Credit Suisse flagged commodities as an, "important growth area," and Morgan Stanley said commodities had a good quarter, JPMorgan suffered as a result of a bad trade on coal and is making energy traders redundant in London after buying Sempra.

Meanwhile, any growth at Credit Suisse may well be in Asia, where the bank has indicated its intention to expand.