The world’s top investment banks stripped out 1,500 front-line jobs in the first six months of this year, as revenues slumped to a 13-year low. Investment banks have been reducing staff more liberally than at any point over the last five years, according to the latest industry report from data provider Coalition. Trading roles were at the sharp end of the cuts.
The data provider, which tracks the twelve largest Global investment banks, found their combined front-office workforce declined by three per cent in the first half of 2019, to 50,400.
Within banks’ equities divisions, headcount fell by 800, while 600 jobs have been lost in fixed income. However, teams of dealmakers in the traditional investment banking business were largely kept intact, with just 100 roles cut.
Since May, large investment banks have unveiled cost-cutting strategies that will result in the loss of close to 30,000 jobs. Of this figure, around 18,000 will go at Deutsche Bank, which is overhauling its business and pulling back from equities sales and trading as it refocuses on corporate banking activities in its home market.
Barclays has cut 3,000 jobs so far this year and HSBC announced in July, that it would strip out 5,000 roles, with a focus on senior positions.
In May, French bank Societe Generale also said that it would cut 1,600 jobs — or 7.5 per cent of total employees — while Citigroup plans to cut hundreds of jobs in its sales and trading business.
Coalition put trading revenues for the 12 largest banks at $76.8 billion during the first six months of 2019. This is an 11 per cent decline on the same period a year before, and the worst start to a year since 2006, when the company started tracking industry revenues. Investment banks’ sales and trading have laboured in listless markets, as asset management clients largely remained on the side-lines across both fixed income and equities.
A 32 per cent decline in European investment banking revenues led to a 16 per cent year-on-year fall in advisory fees globally, according to Dealogic data.
Amid growing uncertainty over the economic outlook, European companies would rather hang on to their cash despite the low interest-rate environment, as they delay making investments.
Companies across Europe, the Middle East and Africa held almost 1.1 trillion euros in cash at the end of last year, a 15 per cent rise from the 941 billion euros they had on their balance sheets a year earlier, according to a report by Moody’s Investors Service.
The credit rating agency said it expected companies to spend some of their cash on working capital loans to cover the costs of stockpiling goods and materials as the UK prepares for either a disorderly or with a deal exit from the European Union.
“Our expectation of a general economic slowdown in Europe will curtail cash generation in some sectors,” Moody’s said, adding it will probably be accompanied by more conservative financial policies aimed at conserving cash.
Activists investors have been pushing companies in the region to spend their cash or give it back to shareholders. Pernod Ricard, the French drinks group under pressure from US hedge fund Elliott Management to improve profit margins, announced plans at the end of August for a 1 billion euro share-buyback programme and new investments in China and the US.
In July, Anglo American announced plans to return 1 billion euro to investors via a buyback it said reflected the “current levels of cash” the London-listed miner was generating. The credit rating agency said that after falling for two years in a row, to 200 billion euros in 2017 from 232 billion euros in 2015, the cash holdings of the top 10 companies leapt by 30 per cent in 2018, to 260 billion euros. Aramco was the region’s largest holder of cash, with 43 billion euros at the end of last year.
The state-owned oil producer is preparing an initial public offering of up to a 5 per cent stake by 2020-21. Volkswagen, the German carmaker, had the second biggest cash pile, up to 37.5 billion euros in 2018 from 27.3 billion euros a year earlier, thanks to a solid operating performance and lower payments last year related to its diesel emissions scandal. Electricite de France had the third biggest cash pile, with 34.2 billion euros sitting on its balance sheet, compared with 28.3 billion the previous year.
(The author is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)
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