Investment Banking Landscape Continues to Shift

With ever declining investment banking revenues, financial institutions in most Western markets continue to reduce their deal teams. For some institutions, this has meant a shift back towards the roots of banking, and others, simply a refocusing of their investment banking activities.

One of the latest shakeups has occurred at Barclays PLC, one of the banks with a large investment banking presence in the past, where it announced that it would be cutting costs on its deal desk ahead of new regulations for the sector. According to the Globe and Mail, Barclays PLC will look to merge trading and distribution teams from fixed income, commodities and currencies into one business line, labelled the Markets division.

Shift May Save Money, Also Increases Flexibility

While these moves seems to be related mostly to reducing overall costs, it seems that other banks are looking to consolidate their investment banking activities into one team, rather than separate desks for a variety of activities. With the current volatility seen in markets worldwide, it is advantageous to shift resources from, for example, the currently struggling IPO desk to the booming investment grade corporate bond desk. Unifying resources under one investment banking platform helps to accomplish this.

New Reality Slow to Sink in for Largest Banks

While business realities have continued to worsen over the past few years, banks have been slow to react for the most part. Reuters recently reported that several European banks, including UBS, Credit Suisse, Deutsche Bank, RBS and BNP Paribas have all cut hundreds of jobs in order to meet return on equity hurdles within their investment banking divisions.

The reality goes beyond just declining activity, but a change in both client demand and technology. Simon Maughan, an Olivetree Securities analyst, told Reuters for their report that investment banks may need to cut up to 40 percent of their staff in order to correct overcapacity caused by efficiencies in technology and a focus on best execution rather than advice.

Organizations Need to Approach the Situation Delicately

Rushing out to restructure an investment banking team by announcing a large strategic review may have unintended consequences for banks. Such an announcement could send top staff scrambling for employment opportunities elsewhere, which could compound revenue problems as clients shuffle out the door with their trusted contacts. In the same Reuters article, John Purcell, a London headhunter, indicated that rash activity could lead to “…death by a thousand cuts.”

Outlook Continues to be Weak for Job Seekers

The investment banking career outlook, especially in relation to the European institutions mentioned herein, continues to be bleak. With limited opportunities, dismissed bankers are competing fiercely for whatever openings become available due to attrition, leaving little opportunity for those outside the sector to gain a foothold. For those with several years of quality investment banking experience, opportunities may exist in select niches that are performing well, such as corporate debt, or in markets with better economic outlooks, like China or Southeast Asia. In traditional markets such as Europe or the United States, and especially in segments such as the IPO business, opportunities are simply scarce and heavily contested. Real changes in the economic outlook will be required for this reality changes for job seekers.

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