Paul Cerro used to work in investment banking. For 14 months to August 2019, he was an analyst on the consumer goods team at Bank of America in New York. Nowadays, he works in business development for start-ups, but plenty of his friends are in banking, and they’re not having an easy time.
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“Lots of my friends in finance can’t get jobs. They have Tier 1 bank experience and some even have MBAs. It’s truly a bloodbath out there,” said Cerro in a viral Tweet last week. “They’re all front office people,” he added. “Hiring is pretty non-existent. Too many people going for just a handful of open spots right now.”
US banks’ results make this seem strange. After all, equity and debt capital markets (ECM and DCM) revenues at JPMorgan were up more than 50% year-on-year in the second quarter. At Citi, M&A revenues were up 72%. Why are banking revenues soaring while banking jobs are not?
The CFOs of both banks helped explain the phenomenon in last week’s investor calls. Mark Mason, CFO at Citi pointed out that the “year-on-year pop” in revenues came from a low base and that in DCM in particular, rising revenues were mostly the result of issuance being brought forward in anticipation of a more challenging second half of the year. Jeremy Barnum, CFO at JPMorgan, confirmed that a lot of the activity in the past quarter was “pull forward.” It was also about refinancing rather than new financing for M&A acquisitions. And in equity capital markets, Barnum said the IPO market was not “quite as good as you would otherwise expect,” partly because private equity companies don’t want to sell at current prices, and partly because the performance of midcap tech stocks and companies that are most likely to IPO hasn’t matched the big tech firms driving the market.
While all this will have weighed on banks’ enthusiasm for adding new staff, another factor also dampened expectations: uncertainty surrounding the US election. The second half could be “more volatile…in the context of a number of important global elections,” said Mason. He was speaking on Friday, before Trump was shot.
Bloomberg notes that the assassination attempt creates opportunities for traders, and says it could “mark the ‘grand opening’ of an elevated period of volatility for risk assets, and encourage trades benefiting from Trump’s anticipated looser fiscal policy.” For bankers, though, it may have the opposite effect. Increased volatility around the US election and the possibility of further political violence are likely to discourage deals until the election is over, and the results agreed upon. At that point, hiring could take off. Until then, Cerro’s friends will most likely stay stuck out of the market.
Separately, while UK banking jobs might benefit from the country’s new sensible status under Keir Starmer’s government, UK private equity (PE) professionals are less enamoured of the new regime. As the Starmer government contemplates taxing carried interest as income, reports are rising of PE professionals looking to relocate.
The Sunday Times says their preferred European location is Milan, where if non-doms pay a flat €100k a year fee, they’re absolved of paying any other tax on overseas income. Given that the average income tax payment from carried interest alone is expected to be £188k in the UK, the savings could be considerable. It’s not all great though – expat finance professionals who’ve made the Milan move say property is expensive. €2.2 million will buy you a flat overlooking the railway track filled with stale smoke.
Meanwhile…
Wells Fargo warned it won’t be able to whittle away costs as fast it previously forecast. (Bloomberg)
Citi said costs are likely to be at the high end of its forecast. (Bloomberg)
Dmitry Green, chief risk officer at Rokos, left after the hedge fund hired someone else with the same title six months ago. (Bloomberg)
Oil traders like Vitol and Trafigura are engaged in a poaching battle. Vitol, which makes many of its senior traders partners in the company, paid $5 billion in dividends last year and rival Trafigura paid $5.9 billion. That resulted in payments of dozens of millions of dollars to some partner-shareholders. (Reuters)
Europe’s hedge fund market is booming. Morgan Stanley says it’s working with more new European hedge fund launches than at any point in the last 10 years. (IFR)
Large multimanager funds such as Citadel, Schonfeld and Point72 posted gains of up to 13.7% in the first half of the year. (Bloomberg)
A judge in the Jane Street-Millennium case, says Jane Street’s lack of non-compete agreements doesn’t prohibit it from pursuing ex-employees if it deems they’re using its trade secrets. “That an employer chooses not to restrict an employee’s ability to work for a competitor does not logically imply that the employer intends to allow the employee to take and use the employer’s confidential information.” (Bloomberg)
Jacobus Swart, a South African lawyer, joined Clifford Chance’s London office as an associate on 10 January 2022, but at a social event just a few weeks later the associate touched a colleague in an “inappropriate and/or unwanted and/or sexually motivated manner without consent”. He has been banned from working in the UK. (RollonFriday)
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