Investment Banking Job Cuts Focus on Equities

There is a fair bit of consolidation that needs to work through the system before the employment situation improves.  Until then, competition will be fierce and quality opportunities few and far between.

With declining global revenues becoming a long term trend for many investment banks, it seems like not a week goes by without another large scale layoff being announced. No segment of the industry has been harder hit than those on equity desks, whether in New York, London or Hong Kong. While certain investment banking sectors have shown preliminary signs of recovery, primarily fixed income origination and trading, revenues from mergers and acquisitions or initial public offerings have continued to fall.

According to a Coalition Ltd. study featured by Bloomberg, employees on stock desks declined 8.5 percent globally in the nine months ended September 2012. Recent announcements have indicated that this trend is likely to continue, with Morgan Stanley, Citibank and RBS being some of the latest firms to announce further job cuts. Overall, the industry lost 68,000 jobs in 2012 from forty investment banks.

Revenue Concerns Continue to Plague Investment Banking

While global banking markets posted their first increase in revenue in over a year in the third quarter of 2012, equity trading revenue continues to lag all other investment banking segments other than advisory services. Globally, equity trading activities have declined dramatically over the past year, with companies listed on U.S. exchanges seeing an 18 percent decline in trading volumes.

Technological Change also Impacting Equity Segment Jobs

While declining trading volumes and equity listing activities are the leading reasons why we are seeing equity job cuts, the increased use of technology is also having an impact on positions in the industry. With the growing use of computerized trading, advanced algorithms and other technology-based strategies, human traders are becoming expensive relics of the past. While there will likely always been room for human judgement on the trading desk, one individual can now do the same work that a handful of traders a decade ago could manage. This is driving further consolidations in the name of operating efficiency.

What Does this Mean for Job Seekers in Investment Banking?

The outlook for employment in the investment banking industry continues to be quite weak, especially for those focused on equity trading positions. Opportunities continue to be available for experienced individuals in fixed income origination and trading positions. Even in these segments, candidates are finding that many of the most attractive positions are located in overseas markets that are experiencing more rapid economic growth, such as Southeast Asia. Those seeking employment in the industry will need to remain opportunistic and be open to accepting less their ideal positions in the short run while global economies recover.

There is a fair bit of consolidation that needs to work through the system before the employment situation improves. Until then, competition will be fierce and quality opportunities few and far between.

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