Are the boom times back as competition heats up for top traders?

European investment banks are set to increase the hiring of stock traders in 2014 on the back of a rallying stock market and stable Eurozone, according to the head of Barclays European equities.

Jonathan Beebe said in an interview:

Most of the restructuring in equities has happened.

Revenue growth this year is around 10 percent for the top 10 banks. That environment may create the need for some banks to look to hire.

The world's highest performing banks are bracing to fight it out for top talent in 2014. The head of Morgan Stanley's investment bank and trading division, Colm Kelleher, told an investor conference that the firm was about to experience "acute" competition for traders.

Kelleher estimated that only companies making revenue putting them in the top third of their peers were profitable. There will be stiff competition among the middle tier which usually breaks even and the typically loss making bottom tier.

At the end of 2013 banks certainly have good reasons for optimism. Banks in the Stoxx 600 have bounced back from their 16-year low in 2009. Deutsche Bank has jumped 87 per cent, while BNP Paribas rallied by 151 per cent. Barclays surged by a whopping 344 per cent. The possibility of increases in hiring certainly makes a change from the news over the past two years of radical reductions in the industry's headcount.

Equities staff at the world's 10 largest investment banks have been cut back from over 20,000 in 2011 to under 18,000 in the third quarter of this year. European banks have culled close to 140,000 staff in the past two years. Deutsche Bank analyst Matt Spink said in a report earlier this month that investment banks may need to slash as many as 3,000 sales and trading positions during 2014 to reduce costs.

However, Beebe said that the worst was now over:

The environment for European equity markets in 2011 and 2012 was challenging.

This led to headcount cuts, investments in new technology, and some reduction in balance sheet and leverage. Now that revenue has rebounded, most banks should be seeing increased returns in their business.