"The really big job cuts won't come until January"
Another bank is making redundancies. Admittedly, it's only Standard Bank, so the ripples in London may not be huge, but it's suggestive of a trend.
As we have remarked upon, banks have so far been restrained regarding job cuts. So far, job cuts have not exceeded 5%, rendering them normal for this time of year.
This does not mean harsher cuts have been avoided, however. Brad Hintz, analyst at Bernstein Research and onetime CFO of Lehman, thinks they are coming, just not until early 2011.
"Thinking as a CFO, I'd say why fire people now when I keep paying them a base salary and then fire them just before bonuses are paid," says Hintz.
"Also, if I fire them right after the end of the year, any termination expenses will go into Q4 numbers, and no one looks at Q4 numbers because they're only interested in the full year," he adds.
"You just take people aside after Christmas."
Who's safe, who's not?
The Financial Times points out today that analysts have slashed their forecasts for Morgan Stanley's third-quarter results by 73% in the past 30 days.
Most of the decline is attributable to anticipated reductions in sales and trading revenues.
"M&A people are safe," opines Hintz. "Capital markets people are safe. Emerging markets people are safe. But cash fixed income businesses which were low margin to begin with are going to be cut back. A portion of derivatives teams will either be reassigned or downsized. Institutional equities will go through further cutbacks."
Even though they're expensive to let go, Hintz predicts senior staff are most likely to be severed.
"The young people are your seed core. You get rid of the expensive partners and you promote the younger folks into their roles," he muses. "But you know the outlook for those businesses isn't as good as it used to be. It's unlikely the new promotes will ever reach the levels of compensation of their predecessors."
