Fear strikes the City as banks deny redundancies are coming (but make them anyway)

Guess what? It's not just Morgan Stanley. If you look around the City of London right now, you'll also see people trickling out of Barclays and of Nomura, with more cuts likely to come elsewhere. It's the time of year for cost-cutting, and preparing for Brexit - which has cost Bank of America alone $400m - makes the need to trim spending even more urgent than usual.

For those who lose their jobs, however, redundancies may still come as a surprise. This year has seen a spate of banks denying redundancies until they actually happen. Rumours of Nomura's 40-50 redundancies in fixed income sales and trading were circulating the City last week, for example, but even last Friday insiders at the bank insisted those rumours were false. Today, those insiders have been proven wrong.

Similarly, Barclays' 15 redundancies in debt capital markets and advisory products came despite denials that layoffs were planned. In the case of Barclays, the recent cuts may simply reflect the annual pruning of under-performers, but costly mid-ranking staff at the British bank may want to watch their backs all the same.

It doesn't help that with the exceptions of M&A and equities sales and trading, most businesses at most banks had a difficult fourth quarter (see the chart below). Coupled with Brexit-related expenditure, disappointing Q4 results are increasing the pressure for costs to be taken out everywhere.

However, cost pressures are higher in some areas than others. As the charts at the bottom of the page from banking intelligence firm Tricumen reflect, some banks were considerably less cost-efficient than the rest in the first nine months of 2018. In light of Q4 results and historic costs as a proportion of revenues, now does not look like the best time to be working in the investment banking division at UBS or the FICC business at Bank of America Merrill Lynch, for example - irrespective of any reassurances that might be issued in the weeks to come.

Operating cost/income ($), first nine months of 2018, investment banking division

Operating cost/income ($), first nine months of 2018, fixed income currencies and capital markets

Operating cost/income ($), first nine months of 2018, equities sales and trading

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