The world’s largest investment banks have significantly reduced the numbers employed, cutting out 2,600 frontline jobs in the 12 months leading up to last October, according to most recent figures released. It takes their total workforce below 50,000 for the first time since the financial crisis.
The latest figures from Coalition, the data provider that tracks employment numbers at the 12 largest investment banks, show they employed 49,200 people in front office work.
The figures represent the biggest year-on-year drop in front-office head count in the past five years and marks a significant milestone in the contraction of the sector since 2008. Coalition has compiled staff data on Bank of America, Barclays, Credit Suisse, Deutsche Bank, HSBC, Goldman Sachs, JP Morgan, Morgan Stanley, Societe Generale and UBS since 2013. Banks’ stock trading units have felt the brunt of the cuts in 2019, according to the data firm.
Weighed down by slumping revenues, regulation and high costs, stock-trading divisions have shed 1,500 jobs over the past year, figures show. Research director at Coalition, Amrit Shahani said: “We’re at an inflection point, and further consolidation among large investment banks’ equities divisions seem inevitable.” He added that most investment banks are operating under small operating margins in their cash equities divisions, particularly if the cost of producing research is booked in the unit.
He said that around 70 per cent to 80 per cent of equities revenues globally are controlled by six large investment banks. Coalition’s latest figures also showed a drop in fixed income trading, where headcount has been more stable. Around 1,100 jobs have been lost within banks’ fixed income, currencies and commodities divisions over the past year, taking total numbers to 16,200, down from 17,300 at the end of September, 2019. It was around a similar level in September 2017 and 2016.
However, banks’ traditional investment banking businesses, which advice companies on mergers and acquisitions or capital raising, have shown more resilience. The 12 largest employed 16,900 people in those divisions at the end of September, marginally down from 17,000 the year before, and 17,100 the year before that.
Despite a decent third quarter for many large investment banks’ equities divisions, revenues from those businesses slumped by 13 per cent across the sector in the first nine months of last year, to $32bn, according to Coalition. This compares with a 5 per cent reduction in both traditional investment banking and fixed income during the same period.
It is notable that in Germany — the powerhouse of the European Union — Deutsche Bank has lost more investment banking revenue to Wall Street rivals in its home market in 2019, which underlines the scale of the challenge facing the German bank even as it refocuses on core business lines and regions.
Deutsche ranked fourth for investment banking revenues generated in Germany till towards the end of last November, with $142m, according to Dealogic, the data provider. This put it behind JP Morgan, Bank of America and Goldman Sachs with little more than a month of 2019 to go.
The standings represent a continued decline for Deutsche. It failed to top the German rankings, which track fees from mergers and acquisitions advice, underwriting and lending, for the first time on records in 2018, when it finished second behind JP Morgan.
The bank is stripping out around 18,000 jobs globally, retrenching from certain investment bank business lines and refocusing on units including corporate banking and European countries.
A senior dealmaker at one US investment bank in London said: “It’s a shame, but they (Deutsche) have been losing out on deals. There’s been so much change in the team that when they pitch for mandate there’s always a question about whether they’ll still be there as the deal progresses.”
Deutsche lost around 50 senior dealmakers last year, according to people close to the bank, with many leaving for competitors. US investment banks have been adding bankers in Germany. Wall Street banks said last year they were targeting Deutsche’s business on its home turf, at a time when the German lender was still top of the league tables.
Another senior banker at a US rival to Deutsche said: “This is a people business and the brutal truth is that Deutsche has been losing talent. They used to have strong dealmakers in Germany supported by industry coverage bankers in London, but their UK team has been hit by departures.” (The writer is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)
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