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What if 2023 isn't like 2008 for banking jobs, but 2003?

As we observed earlier today, 2023 isn't looking that special for banking jobs. Given that revenues from equity capital markets (ECM) and debt capital markets (DCM) deals have ground to a halt in the US since the demise of SVB, banks are far more likely to fire than hire in the second quarter. 

However, one veteran banker says comparisons with the impact of the 2008 financial crisis on banking jobs are overblown. While the financial crisis led to a one-off quick and brutal culling of headcount in 2009, Craig Coben, the former co-head of global equity capital markets at Bank of America, says 2023 isn't like that. It's more like the aftermath of the dotcom crash.

“The worst period for banking job cuts was 2001-2003. After the bursting of the TMT bubble, it seemed there was a gradual grinding down of activity and round after round of job cuts," says Coben. "It was very difficult for people in the industry. We were geared towards TMT and there were some very large teams in that area that were downsized tremendously."

Being like 2003 rather than 2009 may therefore not be a positive. The chart below from the Wall Street Comptroller reflects what happens to employment in the New York securities industry when the technology media and telecoms (TMT) bubble burst. Banks cut people very slightly first in 2001, then a lot in 2002 and then again in 2003. Headcount only started increasing again in 2004. 


Coben, who was a managing director in EMEA equity capital markets at Deutsche Bank during that period, says the cuts (which were replicated globally) blighted his tenure. “No one enjoys these periods and senior people try to protect headcount as best they can, but it becomes very difficult when you’re staffed-up for a particular level of dealflow and that dealflow dries up.”

The parallels with 2003 come from the fact that investment banking revenues plummeted last year following the outbreak of war in Ukraine and that banks have hesitated to make harsh cuts to headcount so far in the hope that deals and revenues will come back again.  One senior equity researcher at UBS says this is starting to look like wishful thinking: "There are going to be some horrific numbers at quarter end and banks are going to start cutting heavily."

While this all sounds horribly ominous, there are - however - some caveats. Coben notes that the savage cuts of 2001-2003 were a learning experience for banks, which suddenly found themselves understaffed when deals recovered: "Activity resumed very quickly in 2004-2005 and they’d cut back so much that they didn’t have the right level of staffing when activity resumed.” Institutional memories of that time mean banks today less trigger-happy as a result.

New York headhunter Michael Nelson says conditions aren't currently bad enough to warrant wholesale jettisoning of headcount:  "Markets overall are strong, fixed income markets are improving and leveraged loans on banks' balance sheets seem to be getting repriced and are being sold on."

Equally, if you can survive this period, you could find yourself very well-placed for the future. British prime minister Rishi Sunak joined Goldman Sachs as an analyst in 2001 and came through multiple rounds of layoffs at the firm before sailing off into a hedge fund and reaching the zenith of self-actualization in the Conservative party. 

Sunak may be a special case, but Coben said there are many other survivors around: "People in banking are very smart. They are very proactive and very capable. Some managed to find a foothold elsewhere in finance, others moved to different industries or different aspects of life. A lot of people went through a difficult period of time that wasn’t easy for them, but everyone I know managed fine. Talented people will find outlets for their abilities after an adjustment.”

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AUTHORSarah Butcher Global Editor
  • An
    29 March 2023

    Does anyone ever read what Sarah Butcher posts? lol

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