Cost reduction has been the paramount theme at the risk-adverse global banks during the first quarter of the calendar year. Deutsche Bank helped to kick start a round of redundancies back in January when it retrenched several bankers in Sydney and Melbourne, including two MDs.

Other firms have also been trimming. One recruiter, who asked not to be named, says Bank of America Merrill Lynch’s capital-markets and advisory headcount has declined by about 25 per cent since last year, with the potential for more job losses before Easter.

If deals aren’t flowing, senior-level cuts can lead to substantial savings. “"If you let go of an MD, you’ve probably reduced your compensation costs by about $1m; a VP is at least $300k to $400k; a VP is at least $300k to $400k.”

RBS has different problems. Headhunters say some of its bankers aren’t waiting for the axe to fall and are looking for opportunities elsewhere. “But the problem is where are they going to go? There just aren’t the roles for them in Australia at the moment. People may be unhappy with their bonuses, but why bother moving?” says the anonymous headhunter.

The risk of research

The sector you cover is partly responsible for how safe your job is. “Natural resources and general industrials people are probably ok, while FIG and real estate bankers are less so because there just aren’t that many deals out there for them.”

And almost regardless of the sector, equity research analysts are under the cost-cutting microscope. “You form part of the revenue stream, but you’re not the person who directly makes the money. You are paid a lot even if the firm isn’t cranking out good deals, but these days, with institutional deal volume down, unless you’re a top-ranked analyst, your role is becoming harder to justify.”

Banks continue to review the employability of researchers who have “been around for ten years and not are ranking well,” he adds. “If you’re the head of equities and you have a director who’s on $400k, you’ll be asking whether a VP can do the same role for less money.”

Do boutiques beat big banks?

Bankers working in niche firms may have slightly less to worry about. The recruiter explains: “Small caps are generating deals, but most big banks usually can’t get down to that level because of their cost structure. If you’re a boutique with a relatively low-cost structure working on transactions in the sub-$100m space, then you’re probably ok.”

He says as they win more deals, independent corporate advisory firms like O’Sullivan Partners and Record Point are providing increasingly stable careers. And established players like Lazard and Rothschild are also becoming more popular as Australian companies increasingly seek non-financial advisors.

“The market is evolving away from the situation five years ago when about ten firms dominated and not many others below them. Now there are about three different levels – full-service globals, independent advisors, and brokers – a lot of players fighting for not much business; hence the redundancies.”

Career fears

The state of the current market has left a few junior investment bankers reconsidering their long-term career prospects, according to some of the 25 HR professionals who attended a roundtable discussion hosted by eFinancialCareers last month.

The headhunter agrees: “Young people are working longer hours for less compensation. Plus your bonuses have a cash ceiling, with the remainder paid in deferred stock at a time when many banks’ stocks are going backwards. And senior bankers too are asking where the deals coming from. Total compensation is down 50 per cent for some of the experienced guys this year.”