Investment banking in Australia: Seven terrible things are ruining recruitment and leading to layoffs

It's nowhere near a second GFC, but it sure is a slowdown - investment banks in Australia have scaled back their hiring compared with last year and some are even making occasional redundancies.

Here are seven reasons why. If you'd like to add more, leave your comments below.

1) Last year's hiring means teams already have enough (or too many) people to handle current and expected deal flows.

2) Cost cutting pressures are encouraging retrenchment and diminishing firms' ability to hire.

3) Comparatively low post-bonus staff turnover in the first half means teams don't have many gaps that need filling.

4) Poor deal flows: Equity markets are relatively flat and there's a lack of large-cap fund raising.

5) Economic uncertainty in Europe and the US.

6) Predictions of job cuts at i-banks in Europe and the US as poor Q2 results are predicted.

7) Renewed fear of "last in first out" is preventing some candidates from moving.

"This environment is conspiring to suggest that, for a majority of firms at least, there won't be much hiring for the rest of the year. With advisory and capital market fees looking shaky, you have to question whether banks will be actively recruiting," says Michael Notley, director, Taurus Financial Recruitment.

Hiring at the moment is mainly "selective" and happens if a key employee leaves or if the bank lands a significant deal, he adds.

Some firms, such as Merrill Lynch, are carrying out a few redundancies of underperformers, according to another headhunter who asked not to be named. Banks are also reducing headcount by not externally replacing people who leave, with their former positions either backfilled in-house or their workloads spread across the remaining team.

The local and international factors listed above mean headcount budgets are generally tighter than 12 months ago. Nomura Australia, to cite an extreme example, lost $46m last financial year, after it recruited several leading bankers in a rapid local expansion. "This loss is not a great signal for recruitment, especially because a lot of it was tied up in employment costs," says the anonymous recruiter.

He adds: "If you have six people on $500k salaries, who aren't generating enough revenue, you could save $3m just by cutting them."

Notley says Australian franchises of global banks have been told to watch their costs "But we're certainly not anywhere near GFC levels when it comes to redundancies."