Redundancies and reduced recruitment as i-banks cut back in Australia

Investment banks in Australia are cutting jobs and doing less recruitment as global cost constraints and a decline in local deals force them into a period of retrenchment.

Oliver Darkes, managing director, Wellesley Partners, says roles at VP level and above are mostly on hold until 2012. And unfortunately the bad employment market can't be entirely explained away by the natural fourth-quarter slowdown when banks become reluctant to buy out bonuses.

Recruitment at investment banks is "significantly lower" than in Q4 last year, says Luke Heath, chief executive, Chandler Heath Executive Recruitment. "It seems to be 30 to 50 per cent down overall. Local franchises were already cautious, but the economic problems in Europe have exacerbated hiring constraints," he adds.

The ugly year-on-year recruitment comparison isn't helped by the fact that 12 months ago - buoyed by record M&A activity in Australia - investment banks finally got the green light to rebuild in the wake of the GFC, says Jason Hutchins, associate, Anton Murray Consulting.

This hiring spree was in anticipation of a busy year of deals in 2011 which, despite a positive start, never fully eventuated. Recruitment has now "slowed to a crawl" and layoffs are happening again, says Hutchins. "Investor confidence is at a minimum off the back of the European and US debt crises. With the bullish business models of the global banks so finely tuned to market activity, this can result in only one thing for some: more redundancies."

So which banks are trimming the fat? "Macquarie and Bank of America Merrill Lynch have let the most go and will continue to do so," says an investment banking headhunter who asked not to be named. RBS has cut in structured products, while Goldman Sachs, Nomura and UBS are among other firms to have made reductions. Another anonymous recruiter doesn't rule out more redundancies before Christmas, but says jobs seem safer at Credit Suisse, Morgan Stanley and Citi.

Hutchins adds: "When revenue's up, everyone's benefiting and banks can invest in more talent. When revenue drops, banks look to cut cost and streamline the business. This has become more apparent in recent years due to these trends becoming condensed over a shorter period. Where bankers would expect maybe three or four redundancies in their career, for some over the last four years, it's been an almost annual event."