"People will come back from August, and it will not be pretty"
If the people let go from Deutsche Bank this week and in weeks to come want to find new jobs, they might need to do so soon. There are already plenty of people on the streets and there could be even more when summer ends.
"Second quarter results are not going to be pretty," says one investment banking headhunter in London, speaking on condition of anonymity. "People are going to come back from their holidays in August and look at the extent to which fees are down dramatically year-on-year. They'll look at their revenues, and their pipelines. They'll look at the bonus pools, and they'll realize that they need to make more cuts simply to preserve margins."
Banks are due to report their second quarter results this month - starting next week. After a difficult first quarter, it would be nice to have some good news, but this is unlikely to be forthcoming. Dealogic's figures for investment banking revenues in the first half of 2019 show fees falling everywhere compared to a year earlier, and in Europe most of all, where they are down 32%. Fixed income and equities sales and trading incomes are unlikely to be much better - analysts at KBW recently revised down their estimates for banks like Citi, Goldman Sachs and Morgan Stanley in the second quarter, based on expected trading decline.
At Deutsche Bank, of course, the people predominantly losing their jobs are in equities sales and trading. But this doesn't mean others in the markets business aren't looking. "Even the people at DB who are not at risk want to leave," says one credit-focused headhunter. "They can see the writing on the wall - Deutsche is becoming a domestic-focused German bank and its appetite for the kind of risk taking with illiquid products which made it money in the past is going to be a lot less."
The happiest people inside Deutsche seem to be in the investment banking division (IBD), where the elevation of Mark Fedorcik, a popular figure internally, to head the investment bank, has gone down well. "Fedorcik is a sensible, straightforward guy," says one senior Deutsche Banker. "Investment banking rules the roost now, it would seem," he adds, noting that Ram Nayak, who runs fixed income trading, seemingly sits below Fedorcik in the org structure (even though both men will report into Sewing).
For the moment, investment banking headhunters say they aren't receiving that many CVs out of DB, although this could change as the new structure settles and if it becomes apparent that the investment bank is effectively subsidiary to Stefan Hoops' corporate banking business. "People are already wondering whether to stay at Deutsche when it's not going to be a full-service investment bank and is focused on Germany," says one investment banking headhunter. As a reminder, Bank of America is hiring...
Joseph Leung, a headhunter at Aubreck Leung in London, says Deutsche people looking for new jobs could be struck by a case of bad timing. "The reality is that the summer hiring lull is upon is and there won't be enough demand for everyone," says Leung. Although he observes that DB people who are let go will at least be cost-effective to hire because they won't come with stock to buy-out.
Needless to say, Deutsche staff aren't the only ones on the market. There are also people from Nomura HSBC, SocGen, Mitsubishi UFJ, and Stifel knocking around. If this is you, you might want to knock harder while the sun still shines. "A lot of banks have been making gentle cuts already this year," says the investment banking headhunter. "The pace is only likely to increase after the holidays."
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