Sputtering Sounds Emanate from the RBC/Jefferies Hiring Engines

It should not be necessary to remind you that RBC and Jefferies have been incomparably great hirers this year. Rather like Bear Stearns, Lehman, and HSBC between 2005 and 2007, they have been "building their businesses" and recruiting.

To wit, Jefferies has hired all manner of people, and RBC has hired 140 people for its capital markets business in Europe, and still said it wanted to hire another 50-75 in June.

Sputter, Sputter, Chug

What with markets being not quite as wonderful as they were, however, RBC and Jefferies may come to regret their hiring enthusiasm.

RBC reported its third quarter results last week, and they were NOT pretty. Revenues across sales and trading fell 65 percent quarter on quarter, and 77 percent year on year. This was worse even than Goldman Sachs and was probably not what they had in mind when they went for a big build out.

Meanwhile, Jefferies will report its third quarter results around August 31st. The doomsayers are lining up already. Dick Bove of Rochdale Securities issued a note earlier this week predicting misfortune on the grounds of depressed market activity, smaller fixed income markets, and seasonal weakness (among other things). His predicted EPS for Jefferies is the lowest on the street.

Hiring Blithely On

Despite all this deep negativity, however, Jefferies and RBC may not stop hiring yet.

A spokeswoman for Jefferies in London declined to comment on its hiring intentions, but Bove reckons "management is committed to its expansion program," and will keep hiring in investment banking, overseas offices and for equity research.

Similarly, an insider at RBC dismisses notions that the bank will retreat to lick its capital markets wounds. "We're continuing with the build out of the equity platform, and corporate finance," he tells us. "We're also continuing to build in the support and control functions - there's more to do in finance, risk and IT."