Layoff risk and compensation projections bank-by-bank
Some investment banks are cutting jobs, others are paring back compensation, while a few unfortunates face both shaky career prospects and smaller bonuses.
Now that most major investment banks have reported their (generally negative) second quarter earnings, it's worth taking a look at both pay and job prospects. After all, the prospect of a bigger bonus isn't appealing it's coupled with the threat of layoffs, and if compensation is being cut drastically, keeping your job doesn't seem like such a boon.
We've compiled a list of the most appealing banks to work for, based on the compensation accrued to date, and job security.
There are some notable absentees - HSBC, Citi, Bank of America Merrill Lynch and Nomura, all of which don't break out pay or headcount for their investment bank.
HSBC is cutting 30,000 jobs over the next two years, but many of those are likely to be confined to the retail bank and back office (it's also not renowned for paying its investment bankers well); Citi is only two-thirds of its way through re-building its investment bank and BofA Merrill has so-far made only light cuts in its global markets while also hinting more are possible. Meanwhile, Nomura has said that it's rolling out a "cost reduction program in wholesale", but Financial News says it's still hiring. RBS reports on Friday.
1) J.P. Morgan investment bank:
Average compensation per head for the first half: $211k
How it compares to this time last year: -5%
Layoff risk: Low. Jamie Dimon has already promised that there will be no "large scale" job cuts at the investment bank, despite the fact it hired over 1,200 people in the second quarter alone. Compensation accrual is down by a minimal amount on last year, but its cost base now looks sustainable - it's now 59%, down from 71% in Q210.
2) Deutsche Bank corporate & investment bank:
Average compensation per head for the first half: $319k*
How it compares to this time last year: +6%
Layoff risk: Low-ish. Revenues for the first six months of the year were up by 2% year on year in Deutsche's corporate and investment bank and even the dreaded fixed income earnings were down a mere 1% on last year. However, its cost-income ratio remains high - 71% which is in line with last year - and a year-on-year 33% decline in compensation accrual in Q2 suggests cost cutting is on the agenda. So far, though, redundancies haven't been mentioned.
*The average compensation figure does not include Deutsche Bank's back office functions.
3) Goldman Sachs:
Average compensation per head for the first half: $238k*
How it compares to this time last year: -16%
Risk of layoff: Moderate. Goldman has currently suggested its cost cutting drive could mean 1,000 redundancies. As we've alluded to previously, this is a net figure and the actual number of cuts could be decidedly higher. Still, with a headcount of 35,500 globally, this works out as a decrease of around just 3%.
*Includes asset management division.
4) Morgan Stanley:
Average compensation per head for the first half: N/A
How it compares to this time last year: Morgan Stanley doesn't break out headcount in its investment bank, but compensation in the institutional securities division is up 10% year-on-year.
Layoff risk: Moderate. Morgan Stanley's investment bank did relatively well in the first half, with fixed income revenues falling by just 10% year-on-year and 11% in its institutional securities division. While redundancies in its investment bank haven't been announced officially, it has (allegedly) been "running layoff scenarios into several thousand folks" including traders and investment bankers. This is not the same as job cuts, but certainly makes you wonder why it's necessary to play out such scenarios.
4) Barclays Capital:
Average compensation per head for the first half: 118k ($192k)
How it compares to this time last year: -9%
Layoff risk: Moderate. BarCap has made 700 layoffs since the beginning of 2011, the majority of which were implemented in January. In total the group has cut 1,400 people and is planning another 1,600 before year-end. Initial indications suggest that overseas retail banking will be hardest hit, but with fixed income revenues declining by an (admittedly resilient) 22% year-on-year, it would be naïve to assume the investment bank would escape entirely.
6) UBS investment bank:
Average compensation per head for the first half: CHF191k ($249k)
How it compares to this time last year: -20%
Layoff risk: High. The mooted 5,000 layoffs have never been confirmed by UBS and remain, for the time being, a rumour. However, the investment bank is looking increasingly likely to be cut back. It accounts for 40% of costs at the group and generates just 22% of its profits. The cost ratio now hovers around 80%, after a relatively aggressive hiring spree last year and slumping trading revenues.
7) Credit Suisse investment bank:
Average compensation per head for the first half: $234k
How it compares to this time last year: -14%
Layoff risk: High. After much speculation, Credit Suisse confirmed that it was cutting 2,000 jobs globally last week. 500 of those will be in Switzerland, and while the rest won't necessarily be confined to the investment bank, it's fair to say it could (and possibly should) feel its fair share of pain. In Q2 revenues fell by 43% quarter on quarter and 31% year on year, and its cost income ratio stood at a staggering 91.2%.
This article first appeared on our UK site