Goldman Sachs is focused on all the opportunities in Europe; here is how you might get employed there

With European banks like SocGen suffering a 93% year-on-year drop in operating income in the third quarter and European banks like Credit Suisse culling staff and pulling back from businesses like CMBS origination, rates and commodities, Goldman Sachs can - it seems - scent an opportunity.

Yesterday, Nomura analyst Glenn Schorr published a note on Goldman's strategy after meeting David Viniar (Goldman's CFO), Pablo Salame and David Heller (co-heads of the securities division).

Schorr said that Viniar, Salame and Heller told him that:

Europe is management's main focus right now, for both risks and opportunities. Political risk has been elevated and is weighing on capital markets activity, keeping Goldman and investors very cautious. Only upside here is that as large European investment banks exit, slim down, or restructure businesses, Goldman is gaining some market share and

expanding its client footprint.

Schorr also communicated Goldman's sentiment that:

...the current capital markets weakness is more cyclical than secular. If management thought this same environment would be here for 2 more years (economic or regulatory),

GS would likely be a lot smaller.

From this, we draw several conclusions: Goldman isn't going to rush to make redundancies; it will take advantage of the chaos in Europe to build its franchise. It may even hire here.

Is Goldman hiring in Europe now?

Headhunters say that Goldman does have some senior positions to fill in London, but that most filling has been delayed until next year. Hiring is most likely to take place in M&A, where fees are expected to pick up in 2012 and capital constraints are minimal.

Goldman may also look to build or upgrade in equity derivatives and cash credit trading. It told Schorr it's gaining share in both - especially from French banks, which are pulling back from equity derivatives slightly. Electronic trading could also be an area of investment, with volumes here growing at a "fast pace."

By comparison, fixed income headhunters say Goldman is showing little enthusiasm to build businesses like rates and emerging markets, which are being vacated by rivals. "Goldman have been very, very cautious about adding headcount in London for the past two years," says one headhunter who works with them. "They're already very strong in areas like rates and commodities, but they could hire more traders who are focused on market making rather than prop trading - although I don't see it happening so far."

Another headhunter points out that a high proportion of Goldman's hires tend to come direct and claims the bank uses a very effective internal referral programme to place many of its people. Goldman didn't immediately respond to a query on this.

However, the headhunter who works for Goldman says most of the people the firm hires externally at senior level tend to be happy where they are and therefore require headhunting. Goldman is less of a draw than it used to be, he claims: "Nowadays, people would much rather work for JPMorgan."

Goldman's share price is down nearly 40% this year; JPMorgan's is down 23%. Business Insider points out that Nouriel Roubini has been tweeting about Goldman's susceptibility to an MF-Global-style withdrawal of short term funding. JPMorgan is less susceptible, says Roubini, because it draws more funding from customer deposits.