Will Macquarie prove to be the canary in the coal mine? Like its larger global rivals, the Australia-based bank has added staff in recent months. Meanwhile its business propects have declined since March, in line with a softening in many bulge-bracket banks' top-line performance last quarter. That's causing growing chatter that Macquarie will soon shift from acquiring and hiring to firing mode.
A UBS research note Friday urged the Australian bank to cut jobs in order to spread what looks to be a shrinking compensation pool across a smaller number of bankers. That could help Macquarie retain talented staff who apparently have been fleeing to better-paying rivals.
Summarizing the note by UBS analyst Jonathan Mott, The Australian reports:
Using the "cake and slice" theory, he noted that pay at Macquarie's investment banking division in the six months ended March 2010 was $231,000 per employee, less than half the numbers at rivals Goldman Sachs and Deutsche Bank.
Mott wrote that compensation may become a "material hurdle for staff retention and the ability to attract high- quality recruits," unless brought back in line with global peers.
Macquarie Chief Executive Nicholas Moore did little to dispel talk layoffs may lie ahead when he delivered a quarterly update last week. Noting that business recently has fallen off in the advisory, securities, fixed income and commodities divisions, which together generate more than two-thirds of group income, he said results will trail last fiscal year's numbers if conditions don't pick up.
Moore went on to indicate the bank is re-thinking its development plans, including "resources," for each major business unit. And he wouldn't rule out staff cuts.
What makes the Australian bank a potential bellwether is it's been among the world's most aggressive institutions in enlarging its global footprint since last autumn. Headcount in Macquarie's securities division jumped 10 percent from September 2009 through March 2010. In the Americas, Macquarie added almost 1,300 employees during that period, a 58 percent rise. Most came through the acquisitions of asset management firm Delaware Investments, broker-dealer Fox-Pitt Kelton, and Canadian wealth manager Blackmont Capital. However, Bloomberg observes the firm has endured "a stream of senior-level departures this year," including Andrew Low, chief operating officer of the investment banking unit, and U.S. capital markets chief Jim Rossman.