Welcome back from your summer vacation. And welcome back to the office. But don't get too comfortable. You probably don't want to disperse too much personal detritus around your desk because if you're in some areas of investment banking at least, you may not be staying long.
Data from Dealogic reveals that contrary to the hopes articulated every few months throughout the year, there was no pick-up in investment banking division revenues in the summer months. Instead, revenues were stubbornly down on the record levels reached in 2021. If cuts were coming before you went away, they're still coming now that you're back.
Relative to 2021, investment bankers in North America fared the worst this summer. Their revenues were down 51% in July and August (versus 33% in Asia and 38% in EMEA). More specifically, EMEA M&A bankers seem to have got off lightly in the summer lull; so do APAC equity capital markets (ECM) bankers.
It doesn't look good, but optimists and bullish banking CEOs argue that comparisons between this year and last year's investment banking revenues are irrelevant because last year was an anomaly. This, for example, was the point made by Goldman Sachs CEO David Solomon during the bank's last investor call. Instead of 2021, Solomon argued that the relevant comparator is the average for the past seven years. Things aren't going to rebound to last year's giddy heights, said Solomon, but said he'd be surprised if there's not some "normalization" of capital markets activity in 2023.
Bankers everywhere will hope Solomon is right. eFinancialCareers' own data suggests M&A hiring at least has been peculiarly resilient, but as the summer draws to an end, the next few months are still being viewed with trepidation. Credit Suisse is due to announce its restructuring plans in October and while its investment bankers should be shielded from pains that will probably be inflicted on its credit traders, they are leaving all the same. Meanwhile, UBS is already cutting investment bankers in Hong Kong after an alleged halving of its investment banking revenues in China this year compared to last. If that's the trigger for job cuts, the chart above suggests recent months could inspire other banks to do the same.
Speaking in July, Moelis & Co. CEO Ken Moelis said that if cuts come, they will likely be set in motion after Labor Day because this is when "the word goes out to look at headcount." - "It's just the way the cycle works....," said Moelis, reflecting on his own time in big banks."
If the word goes out in September, action may be taken from October onwards. An M&A VP at one US bank in London said clarity on job cuts is only likely in mid to late October. "Many deals are on hold because financing has dried up, but deals could be released after September subject to macro data," he said optimistically. "It will never be as good as 2021. The question now is whether it's a bad year or a really ____ year."
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