Is 2014 going to be a big year for banking recruitment? Unfortunately, probably not. Banks' results for the three months to September 2013 were poor and costs look dangerously high. Regulatory and compliance recruitment remains a priority and banks like RBS and Barclays have scheduled reviews of their businesses in February which look set to generate further investment banking redundancies.
Nonetheless, there may be some bright spots for banks' front office recruitment next year. They may not be that bright, and they're slightly contingent on deal pipelines and the continuation of QE. Huge may be overstatement. Big(ish) may be more like it.
1. Jobs related to funding valuation adjustment (FVA)
A few years ago, counterparty valuation adjustment (CVA) was the new thing. 2014 will be all about funding valuation adjustment according to Christian Robbins at search firm Cherry Bull.
Funding valuation adjustment (FVA) represents a big change in the way banks value uncollateralised derivatives. In 2012, RBS, Barclays, Goldman Sachs and Lloyds began breaking out FVA in their quarterly reports. Under FVA, traders have the cost of funding a derivatives transaction incorporated into their own P&L. This can be complex and encompasses everything from funding for the swap transaction to discounting future cash flows. In the past, trades were funded at LIBOR.
KPMG says FVA is the most complicated change so far in the way banks account for risk. Like CVA, banks are setting up desks to deal with it. However, while CVA desks are all about hedging risk on the external market, banks' FVA desks need to hedge risk based upon the funding curves of the organisation as a whole and therefore to liaise with the central treasury team.
Robbins says banks are migrating existing CVA desks into broader 'capital optimization' units which cover CVA, risk weighted assets (RWA) and FVA. CVA traders are already being hired for new FVA roles, says Robbins. Some risk managers are moving into the FVA positions too.
As an internal hedging position, FVA isn't a stereotypical front office trading job. However, the growth of CVA desks suggests it could become a far more important function in future, making it opportune to get into the area early on.
2. Low-touch, low-paid trading jobs
The future of trading has been revealed, and it lies in...Birmingham.
As was reported earlier this year, Deutsche Bank has been hiring traders and salespeople for its Birmingham office. However, the traders and salespeople in Birmingham won't be the same as their counterparts in London. - Deutsche's Birmingham office is all about low touch electronic trading with smaller clients who don't demand a high level of human attention.
Headhunters say other banks are exploring similar models - and looking at shifting trading away from London. JPMorgan is said to be locating trading jobs in Bournemouth. Bank of America is rumoured to be contemplating shifting some trading roles to Chester. This has not been confirmed by either bank, however...
3. Leveraged finance and sponsor coverage
Headhunters say leveraged finance hiring should be stronger in 2014. "Hiring is likely to be across the board in leveraged finance, to be honest," says Stéphane Rambosson at search firm Veni Partners.
However, other headhunters caution against extreme excitement about leveraged finance hiring. "There's more dealflow so corporate loan origination has got some gaps, but there are still capable teams in place," says Lee Thacker at Silvermine Partners. "You might see the odd director and VP being hired, and some fill-ins or upgrades, but you won't see massive volumes," he adds.
Much of the hiring related to leveraged finance is likely to be for sponsor (private equity) coverage, says Thacker. Bank of America hired Saba Nazar from Nomura in July. Bank of America also lost Simona Maellare to UBS this week. Maellare will run the sponsors team at the Swiss bank.
4. Jobs related to institutional mandates in private banking
Private banks are focusing more heavily on bringing in money from semi-institutional clients like charities alongside wealthy individuals, says Russell Clarke at search firm Figtree Search.
"The multi-asset fund range in the private banking and asset management arms of universal banks are merging and organising themselves around multi-asset and absolute return strategies," says Clarke. "They're looking at bringing across more people from markets arms to enhance their offering of more leveraged products and to better serve clients seeking alpha-driven institutional risk returns," he adds.