Barclays Plc, Credit Suisse Group AG and Royal Bank of Scotland Group Plc, which added 6,500 staff at their securities units in the past year, may lead a slowdown in hiring in Europe as the fixed-income trading boom fizzles out, recruiters said.
“Now that trading revenues are dropping there’s a hiring freeze on,” said John Purcell, managing director at executive search firm Purcell & Co. in London. “I wouldn’t be surprised to see people shedding traders again.”
Barclays Capital said last week income from trading bonds and commodities fell 40 percent in the first half amid the sovereign debt crisis. Fixed-income, currencies and commodities trading was the biggest revenue contributor at investment banks from Deutsche Bank AG to Goldman Sachs Group Inc.
The decline marks a reversal from 2009, when banks were able to boost trading revenue to a record by borrowing cheaply from central banks to invest in higher-yielding government bonds, allowing them to replace the bankers they fired during the credit crunch. The sovereign debt crisis caused bonds of Portugal, Greece and Spain to plunge, making the trade less profitable and made investors more cautious in taking on risk.
At the same time, revenue from advising on mergers and stock offerings tumbled. The pace of mergers in Western Europe dropped 9 percent in the second quarter from the previous three months, while the value of European share sales fell 27 percent, according to data compiled by Bloomberg. In all, investment banking fees in Western Europe slid 23 percent in the first half, according to New York-based research company Freeman & Co.
“It’s a tough market for investment banks at the moment,” said Christopher Wheeler, an analyst at Mediobanca Securities in London. “Equity issuance is low and debt issuance fell off a cliff in the second quarter. Freezes won’t be odd.”
Barclays Capital added about 3,600 people in the 12 months to June 30, while Credit Suisse hired 1,800 and RBS’s securities unit increased headcount by approximately 1,100. In March, UBS AG Chief Executive Officer Oswald Gruebel said the bank hired about 350 fixed-income traders over the preceding 12 months.
Credit Suisse and Barclays Capital said on Aug. 11 they plan job cuts. Credit Suisse said it will eliminate 75 posts in the U.K. Barclays Capital is cutting 300 administrative jobs, a person with knowledge of the matter said at the time. Barclays plans to recruit in its growth areas, a spokesman said.
“We continue to be proactive about monitoring the size of our business relative to client opportunities and market conditions,” Credit Suisse said in an Aug. 11 statement.
‘War for Talent’
“The war for talent has meant that the cost of hiring has gone up significantly,” UBS Chief Financial Officer John Cryan said in an interview on July 27. “I wouldn’t expect that we’d be taking on enormous numbers.”
The cost of employing bankers jumped after the U.K. last year levied a 50 percent one-time tax on discretionary bonuses. The securities units of Barclays and Citigroup Inc. also boosted salaries after Group of 20 leaders called on banks to stop guaranteeing bonuses for longer than one year.
“A lot of the hires that companies were trying to make did not get approved by management especially those with guaranteed bonuses,” said Jason Kennedy, chief executive officer of Kennedy Group, a London-based executive search firm. “They are saying: sorry there is a freeze of guarantee-type hires. It’s on base-pay only.”
Bankers who would once have received between 1 million pounds ($1.6 million) to 3 million pounds in guaranteed compensation are now being offered base pay of about 200,000 pounds to 300,000 pounds, he said.
Securities firms are still hiring outside Western Europe. Zurich-based UBS plans to set up an investment bank in Brazil after selling a unit in the country last year to raise capital. Barclays Capital may add as much as 10 percent more staff this year, with the expansion targeted mostly on Asia, Rich Ricci, co-chief executive officer of Barclays corporate and investment bank, said in an interview this month.