100 staff have left EFG Hermes’ investment bank in the last year, but employee costs remain the same. Is this sustainable?

Despite the arid deal landscape within the Middle Eastern investment banking sector, there’s a perceived wisdom that the under-performing staff at EFG Hermes remain a valuable asset.

The consortium of financial professionals bidding for a stake in the bank earlier this year believed so, and clearly the institution itself does too, hence comparatively light redundancies in the face of falling profits.

Revenues in the investment bank continue to tumble; its investment bank posted E£195m (AED117.8m) in Q2, a 13% decline from the E£223m, while profits are down 57% year-on-year. Clearly, there’s a need to cut back and it has, to an extent, with employee numbers now at 928, down from 1,028 at this point last year.

The question is whether this is enough, however. Despite the reduction in headcount, employee expenses are broadly flat. It spent E£117m on its staff during Q2, E£2m more than the comparable period in 2011. This is a cost-income ratio of 68% for its staff, which compares well with its international peers, but still clearly needs to be reined in.

Investment bankers are expensive, and good ones even more so. Even with the tie-up with QInvest, can EFG Hermes afford to keep hold of them?