INVESTMENT bankers are facing the prospect of mass lay-offs as the City struggles to cope with an ongoing period of low trading volumes and depressed revenues.
City A.M. understands that Credit Suisse plans to announce hundreds of job cuts this Thursday following a headcount freeze put in place in London last month. The bank has warned publicly that it will be “adjusting capacity to meet client needs”.
One source familiar with the situation said that the majority of the cuts are likely to be in equities, with fixed income, commodities and currencies (FICC) also being hit hard. The source put a figure of 300 on the global cuts, though others have estimated as the cull to be as high as 600.
The group’s latest quarterly results showed revenues down 13 per cent quarter on quarter, while headcount grew four per cent.
Another source said that Credit Suisse also launched a consultation on jobs at its UK bank last week, meaning that London will see over 100 jobs cut – 100 being the lowest level at which a consultation is legally required.
According to two well-placed industry sources, UBS has also privately told several of its City contacts that there is an unofficial headcount freeze in its London FICC division, though a source close to the bank denied this. One of the sources added that Bank of America/Merrill Lynch also has a headcount freeze in equities and FICC in the UK.
The stagnation follows rounds of job cuts already announced at Barclays Capital and Goldman Sachs, each of which are slashing hundreds of roles due to slow trading volumes.
But only developed countries will see cuts, with competition for talent still fierce in fast-growing economies like Hong Kong and Singapore.
One industry source said: “The banks now have more inflexible cost bases due to regulation and a higher fixed compensation costs.” The EU introduced the world’s most restrictive bonus laws last year, prompting some banks to raise base salaries.
The cuts also follow a year in which some say banks over-hired due to optimism about global growth.
Nick Stevens, chief executive of recruiter Eximius Group, said: “We saw heavy increases in investment banking headcount through 2010 following strong 2009 profits and in anticipation of increased demand. Broadly growth has been slower than expected.”
The jobs crunch has also felled City recruiters, with Kinsey Allen International forced into administration last month.
The bad news for front-of-house staff contrasts to a boom forecast in back-office compliance and risk roles due to new regulation, suggesting that City workers could see a two-tier recovery.