Front office hiring is back in investment banking. Here are nine expanding sectors

Investment banks are tentatively adding headcount in the front office after 18 months of viciously slashing back. Headhunters in London are caught between a sense of optimism that the market has genuinely turned and fear that it’s a repeat of the 2010 “blip” uptick in recruitment that eventually necessitated even deeper redundancies.

Nonetheless, banks are hiring in the City once again, according to the recruiters we spoke to, here’s where they’re seeing the action.

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1. Third-year analyst and associate level

Moves at the junior level rarely hit the headlines, but analyst and associates are gravitating towards private equity firms, or exiting the industry entirely, at a faster rate than in the past, believes Logan Naidu, CEO of headhunters Dartmouth Partners.

“The attrition rate at the junior level is high currently, and banks are having to work harder to replace those leaving for private equity firms or corporates,” he said.

2. Leveraged finance

According to data provider Dealogic, the total revenues from global leveraged loans stood at a record high of $13bn at the beginning of August. Most firms believe that there’s a need to hire again in this area, said Stéphane Rambosson, managing partner at Veni Partners.

“Most banks are focusing on bringing in either rain-makers, or mid-ranking investment bankers to capitalise on the increased deal flow in leveraged finance,” he said.

3. TMT advisory

Investment banks are scrambling to take on TMT professionals across all levels, particularly those with a technology focus, believes Andy Pringle, managing director, Circle Square Talent.

“There’s been a big uptick in deals, and banks are finding their teams over-stretched,” he said.

In the first half of this year, TMT deals accounted for 21.7% of global M&A, according to data from Mergermarket, and amounted to $232bn. In Europe, so far this year they’ve already overtaken the full year of 2012, by over 16% to reach $77.6bn.

HSBC has been building its TMT business since hiring Daniel Bailey to head the division up in March, while UBS brought in technology specialist Steve Pierson earlier this month.

4. Equity research – senior and junior levels

Equity research teams have been slashed to the bone and, despite senior hires at places like HSBC and RBC Capital, those in the industry remain unconvinced of any recruitment uptick in the long-run. However, it’s looking decidedly less bleak than it was, said Naidu.

“Investment banks had a few people in their research teams covering a lot of stocks and, having brought in some new senior staff recently, are also realising they have gaps to fill at the junior end as well,” he said.

5. Scandinavian M&A teams in London

Investment banks were more likely to cull their country-specific M&A divisions last year, while maintaining their coverage teams, said Pringle. However, the surge in Nordic M&A deals throughout the course of 2012 – an increase of 28% versus a decrease of 30% last year in Western Europe, according to S&P Capital IQ – has prompted many to start recruiting in this area, he said.

“Most of this is in London, with most banks still reluctant to build headcount on the ground in Denmark, Norway, Sweden or Finland,” he said.

6. Financial Institutions Group (FIG)

HSBC is building its FIG ECM team, Bank of America Merrill Lynch has brought in Giorgio Cocini in London and John Binnie in the U.S. in senior FIG positions and J.P. Morgan has hired Travis Machen from Morgan Stanley.  This is indicative of an increased appetite to hire in this area, said Jonathan Eckman, a partner at search firm Aubreck Leung.

“A lot of clients are looking to expand their FIG teams across ECM and M&A,” he said.

7. Equity capital markets

It’s not just HSBC talking up building its ECM teams after a promising signs that the market is picking up again. Headhunters suggest that there are also jobs to be had at RBC Capital Markets, Goldman Sachs and Credit Suisse.

“Banks have lost a lot of people in their ECM teams and are starting to struggle in terms of execution as well as needing better origination bankers,” said Rambosson.

8. Private placement

The likes of UBS and Credit Suisse have traditionally dominated the secondary market advisory sector, but increasing competition from smaller players and firms like Evercore Partners – which recently launched a secondary private funds unit – has prompted the larger firms to bulk up in recent months, according to headhunters.

“It’s an area where activity has picked up recently,” said Pringle.

9. Real estate

The statistics point to a mini-resurgence in the real estate sector – there were $369m in investment banking fees to August in EMEA, compared to $225m a year earlier, according to Dealogic. Hiring in this area has been tentative, and largely at the senior end, but it’s starting to pick up, said Pringle.

“Banks are starting to do more deals, directors in the teams are being promoted to managing directors, which is creating gaps lower down the ranks. Banks are building now in anticipation of an uptick in activity over the next two years,” he said.