The most dangerous seats in banking
It's been a perilous couple of months for a particular breed of employee in investments banks. Since the start of 2018, European banks have been clearing out their more senior staff.
Barclays went first. Following weeks of rumour, the British bank cut 100 managing directors and directors in January. Now Deutsche Bank is at it, cutting what Bloomberg says are at least 250 jobs from its investment bank, but possibly as many as 500 in Europe and on Wall Street. Insiders claim 7% of Deutsche's EMEA corporate finance division has been put at risk, with directors and managing directors mostly affected. Credit Suisse is said to be making some very quiet layoffs of its own, eliminating an alleged 3% of staff before bonuses are announced. Guess who's being hit hardest? Managing directors and directors, again.
If there's a conclusion to be drawn here, it is that you wouldn't want to be a managing director or director in a European bank at this point in time. European banks need to cut costs. At Deutsche Bank's corporate and investment bank, costs were 127% of revenues in the fourth quarter. At Credit Suisse, CFO David Mathers, said earlier this month that the bank expects to eliminate a further CHF550m of costs from across the bank in 2018. Barclays has been cutting following some big hiring last year.
"There's a whole load of dead wood at these places," says the managing director of one headhunting firm in London. "Not just at managing director level, but director level too. These people are very vulnerable."
As European banks scour their ranks for mediocre but expensive staff, the long-established process of "juniorization" continues. "Generally there are cuts at managing director and director level and there is a greater volume of hiring at VP and associate level," says Kumaran Surenthirathas at Rosehill Search. This might be why headhunters who focus on placing investment banking division staff at analyst, associate or vice president levels, could not be more ebullient. "We are very busy at the moment," says Logan Naidu, CEO of recruitment firm Dartmouth Partners. "Last month was a record month for us."
Juniors appear to have been paid well at the banks that have announced so far (mostly Americans): "Analysts and associates were generally - but not entirely happy with the last bonus round," says Naidu. This is likely to be repeated as Europeans pay too: UBS, for example, is understood to be skewing bonuses towards its junior ranks (whilst also, allegedly, culling a few associates and VPs in IBD the process).
If you're an associate or a VP, you should - at least - be able to find a new job if you're let go. If you're a director or management director, good luck to you, especially if you work in a macro division where hiring got ahead of itself in 2017. - "It was nonsensical in 2017," says one rates headhunter. "- There was all this hiring but no performance. It was our busiest year since 2012, but there weren't the revenues to match. It's going to be a lot more subdued this year. "
Not everyone is pessimistic. Surenthirathas says revenue generating directors with client relationships are still in, "high demand." Even so, if you're a director or managing director you probably want to keep your head down right now. You're an expensive resource; few other places want you and there are plenty of pretenders coming up who could do your jobs more cheaply.
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