The best and worst places to work in investment banking now
The investment banking job market for revenue-generating employees appears to be in a state of calm. Yes, banks are still cutting in the front office, and more firms are highlighting the need for ongoing shrinkage, but in the second half of 2014, just 200 jobs were lost.
Investment banks did most of their trimming in the first half of 2014, according to new data from research firm Coalition. As the chart below shows, 2,100 jobs were annihilated last year, or a reduction of 4%. Fixed income currencies and commodities (FICC) divisions bore the brunt of the changes, but net headcount has fallen across the industry by just 200 people since the end of June.
Coalition's index is based on publicly announced figures, its own research and validated numbers from large investment banks.
Most of these job cuts were in FICC, which is not a huge surprise considering the ongoing reduction in revenues. FICC traders can at least console themselves with the fact that the second half of 2014 was less bad than the same period in 2013. Revenues fell by 13% year-on-year in the first half, but increased by 1% in the final six months of 2014. Nonetheless, credit and rates remain shaky places to be - revenues tumbled by 14% and 11% respectively. Given that collective earnings in rates have now fallen by $11.9bn over the past two years alone, traders there look most at risk.
IBD bankers have every right to feel hard done by. Revenues in M&A were up by 16%, while ECM bankers posted 11% gains, but headcount fell by 1% across IBD nonetheless. Headcount fell by 1% in equities too, even though revenues there fell by far more. Revenues in cash equities tumbled by 11% year-on-year; equity derivative revenues fell by 8%.
All of this has to be framed into the broader context of headcount reduction in the last five years. Since 2010, nearly 20% of all front office bankers globally have been laid off, according to Coalition. In fixed income sales and trading 27% of people have gone. In equities it’s 16%. In investment banking divisions, 13% of people have disappeared.
Based on these figures there are really only three areas of investment banking where you should want to work right now - equity capital markets, M&A and prime services. But is the latter really that safe? J.P. Morgan has highlighted it as a potential target for reduction if it decides to shrink its investment bank and Credit Suisse and Barclays have already cut jobs. The capital hungry nature of the business means other banks could follow suit.
Finally, operating margins have continued to decline across the sector. This is largely down to increased regulatory reporting and technology costs, says Coalition, but banks have also been spending more on retention, which is a glimmer of hope for your prospects.