A sign that all these new 100k+ support roles in investment banks are sapping pay and profitability in the front office
As we noted earlier, Bank of America Merrill Lynch's investment banking business didn't do very well at all in London last year.
BAML International's $2.6bn profit in 2009 became a $90m loss in 2010. The bank attributed this unfortunate change in its circumstances to 'uncertainty over economic conditions' and to increased risk aversion. But it could also have had something to do with a sudden rush of recruitment in the back and middle office.
Last year, BAML International increased headcount in its middle and back office by 373 people. Over the same period, it reduced the number of people working in its sales, trading and advisory functions by 68. By the end of the year, 60% of its staff in London were working in support, operations and technology roles.
By comparison, at Goldman Sachs International in London only 50% of employees worked in support functions last year. The firm appears to impose strict controls to keep it this way: 50% of its London people were support staff in 2009, and 50% of its hires last year went into support jobs, thereby ensuring the ratio remained constant.
The non-revenue generators on 100k plus
Goldman's approach looks wise. Increasing the proportion of middle and back office is a significant drain on profits.
Senior technologists are now earning 100k+ salaries as are plenty of other people in the middle and back office.
Hence, in their recent salary survey, recruitment firm PSD Group predicted compensation will continue rising for compliance staff in London as banks struggle to get to grips with 'complex regulation.' Banks are particularly chasing senior compliance managers with 5 years' plus experience, most of whom are now on salaries alone of 60-90k.
Equally, PSD said salaries have increased "significantly" for AVP/VP level risk candidates. It added that counteroffers for risk roles are common and that a VP in market risk can now earn anything from 85k-100k in salary.
With revenues flagging and support costs rising, something has to give. Profits appear to be it.
