Any fixed income traders leaving Goldman Sachs might want to join J.P. Morgan
Surprise! Goldman Sachs is making layoffs in fixed income. The Wall Street Journal reports that the U.S. bank is preparing to cut 10% of its 2,500 fixed income traders and salespeople. This is twice as many as it would usually cut as part of its seasonal performance cull. J.P. Morgan, however, has no plans to do the same.
In today's call accompanying the bank's fourth quarter results, J.P. Morgan CFO Marianne Lake, said she's got no intention of making additional cuts in fixed income. "Our business is at scale and productive," Lake told analysts. "We have always been very discjplined about staffing levels and expenses...compensation has come down across the trading business and it won't surprise you to learn that a lot of that has been in fixed income."
Even better, Lake implied that J.P. Morgan is waiting in the wings, ready to seize share from Goldman and others as they pull out: "There are other people who are not going to be as aggressive. If we can take share, we certainly will.”
Of course, it's always possible that Lake will change her mind. Revenues in J.P. Morgan's fixed income, currencies and commodities division fell 11% year-on-year in 2015, and this followed a 13% decrease one year earlier. Goldman Sachs also said a lot about not cutting staff in fixed income, and clearly had second thoughts.
This isn't to say that there will no redundancies whatsoever at J.P. Morgan this year. Lake said the bank is $1bn of the way through taking out the $2.8bn of investment banking costs that it plans to extract between 2014 and 2017. Cost cutting so far focused on business simplification, said Lake. From now on, cutting will be about "technology and operations and infrastructure." This will be "harder", she said: "We're still on track to deliver it, but it will be a job that's ongoing through 2016 and 2017."