As the end of the year approaches and banks start looking at how much they can afford to pay and how many people they need to pay, the denominator is likely to be shrunk to fit. Bank of America has already started lopping off senior staff after warning that revenues in its sales and trading business could fall 5-6% in the final quarter. If Deutsche Bank's analysts are right, plenty of other banks will soon be doing the same.
In a note just issued, Deutsche's analysts say that the scenery on the banking savannah has been pretty dismal in Q3.
Basically, you don't want to be working in equity capital markets or debt capital markets now: "Investment grade issuance was down 7% YoY in Q3, high yield issuance was down 42%, IPOs were down 71% (albeit on a strong Q3 2014) and secondary placings were down 25%."
Nor do you want to be working in sales and trading, or at least not in equities, equity derivatives, or desks reliant on carry trades: "...risk asset prices declined, a negative indicator for cash equities and carry-FICC businesses...Rising equity volatility combined with declining risk asset prices has historically shown strong correlation with poor equity derivative results."
So, where are the good places to be in banks in Q3? Try M&A (announced deals up 30% year-on-year), or G10 rates and G10 FX (should benefit from volatility.)
Overall, it all looks a bit dismal though: "Unfortunately, September was a difficult month, with the lead indicators all pointing towards a tough Q3 earnings season for investment banks," says Deutsche.