Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.

Rarely has an industry lost so many jobs with such little effect.

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European financials stocks are down 1.5 percent over the past 12 months

HSBC has frozen hiring and pay; Barclays plans to cut 1,200 investment banking jobs; and Deutsche Bank will cut bonuses after posting a stinging loss for 2015.

It's already been a grim year for bankers' jobs. But it's not been the only one. In all, half a million jobs have been eliminated across the industry since the global financial crisis of 2008, according to Bloomberg News.

And it's likely to get worse in Europe this year as revenue stagnates. UBS yesterday reported a slump in investment banking revenue during the fourth quarter.

Despite the wave of firings, costs at investment banks remain stubbornly high -- both in absolute terms and as a proportion of revenue. The cost-income ratio at UBS's investment bank is still 93 percent, the company said on Tuesday.

Stubborn Costs
Investment banking costs
Source: Coalition

Front-office headcount at top global firms tracked by research firm Coalition has fallen 23 percent since 2010 ; overall costs, including compensation and other overheads, are down only 8 percent.

Cutting the Producers
Number of front office employees at financial firms
Source: Coalition

Revenue fell 12 percent between 2010 and 2014, according to Coalition . So profitability has taken a hit: returns on equity are below 2010 levels at Deutsche Bank, Barclays, Credit Suisse, UBS and BNP Paribas, according to Bloomberg data. ROEs for global banks haven't exceed their cost of equity since the financial crisis, according to McKinsey.

Investment-Banking Revenue
Source: Coalition

European firms were slower than their U.S. counterparts to eliminate jobs. Pay experts say average compensation per head has changed little over the past five years, largely because investment banks kept faith in an eventual rebound that would reward those that had kept experienced staff.

Many were still hiring in some areas: the rise in regulation and risk-management requirements since the crisis of 2008 pushed firms to add compliance staff, dampening the impact of cuts elsewhere and doing little to generate extra revenue. Non-compensation costs -- such as technology and overheads linked to new regulatory requirements -- were basically unchanged.

Firms have also had to grapple with fines, costlier capital charges and taxes that have all eaten into earnings and destroyed value for shareholders.

European banks' shares are still stubbornly trading below book value. Consensus estimates for annual revenue have been on a downward path since the crisis, with little turnaround in sight.

The good news is the next round of cuts might have more of an effect: the bulk of the investments in regulation and compliance have been made, even if nobody would bet on an actual drop in regulatory costs. Likewise, technology spending, while unlikely to go down, may start to reap rewards as a cost-saver rather than a revenue driver.

Even so, the rebound hasn't come and the business model is still broken. Banks need to cut entire businesses rather than simply jobs.

Fixed-income and commodities trading is sucking up costs and failing to contribute revenue -- Deutsche Bank reported a 17 percent drop in FICC income and other Europeans are expected to follow suit with an average drop of 22 percent, according to Goldman Sachs analysts.

It's too early to tell if banks will make tough decisions when deciding where to wield the ax. Hiring freezes and pay cuts are a start -- but they won't be enough.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Coalition's sample include Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and UBS.

  2. Coalition doesn't have a revenue figure for 2015 yet.

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Lionel Laurent in London at

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Edward Evans at