Just because Wall Street’s biggest banks are shrinking debt-trading desks doesn’t mean the war for talent is over.
Bank of America Corp., which has been cutting jobs across its trading and investment-banking units, this month hired credit salesmen Craig Torrie from Morgan Stanley and Jeffrey Wilner from JPMorgan Chase & Co., according to Financial Industry Regulatory Authority records.
Barclays Plc this month added investment-grade credit trader Matthew Porterfield from Bank of America. Thomas Skove, who formerly headed Bank of America’s U.S. high-grade industrial bond trading, joined Bank of Nova Scotia’s securities unit last month, the records show.
Unlike the stock market, Wall Street relies primarily on human traders in credit, where transactions typically take place over the telephone and through e-mails. While debt-trading units are becoming less profitable, they’re still important to banks vying for lucrative jobs underwriting corporate-bond offerings - - a business that’s delivered fees of about $9.9 billion on $2.1 trillion of sales globally this year, according to data compiled by Bloomberg.
“They need salespeople and traders to support new issues and support the functionality of the markets,” said Michael Maloney, president of New York-based headhunter Maloney Inc. “People have been talking about the corporate-bond industry being computerized for 30 years. You still need the people.”
Also, when markets become more volatile again, banks want to have top teams in place to take advantage of dislocations and avoid losses as trading revenues slump.
Jefferies Group LLC said today that trading revenue fell 5 percent in the three months ended May 31 while revenue from investment banking climbed. Citigroup Inc. Chief Financial Officer John Gerspach said last month that second-quarter trading revenue could be down 20 percent to 25 percent in a market he described as “becalmed.”
While some banks, like Nomura Holdings Inc., are expanding their corporate-bond teams, others are shrinking debt units. Barclays said in May it was eliminating 7,000 jobs at its investment bank, with Chief Executive Officer Antony Jenkins saying the investment bank was “too exposed to volatility in fixed-income, currencies and commodities.”
Zia Ahmed, a spokesman for Bank of America; Brandon Ashcraft of Barclays; and Joe Konecny of Bank of Nova Scotia, all declined to comment. Mary Claire Delaney, a Morgan Stanley spokeswoman and JPMorgan spokesman Justin Perras didn’t immediately respond to requests for comment.
There’s still money to be made in a U.S. corporate-debt market that’s ballooned about 50 percent since 2008. Companies are rushing to sell bonds to lock in record-low borrowing costs as the Federal Reserve maintains its stimulus for a sixth year.
Bank of America generates about $3 billion a quarter from its fixed-income, currencies and commodities underwriting and trading businesses, and the lender has seen “reasonable activities” in credit, Chief Executive Officer Brian Moynihan said May 14, according to a transcript of a conference hosted by Barclays.
Credit trading has been a stubborn holdout in a world that’s becoming more automated. While 49 percent of U.S. government-debt transactions were conducted electronically last year, only 19 percent of global investment-grade corporate trades were done on similar systems, according to Greenwich Associates.
So when it comes to credit, Wall Street remains beholden to traders and their relationships. Just maybe not quite as many of them as it once did.