Change, pressure to deliver and a growing onus on compliance remain key issues for all banks. The latest market trends have implications for all major areas of the business, including the Front Office.
At the most senior level, several institutions have been reshuffling the pack at the top of their wholesale banks. This seems partially driven by regulatory requirements, and partially by the desire for fresh eyes to eek maximum revenue from existing developed client segments. Whilst many of these moves have been internal promotions, such as at JPMorgan, the likes of Standard Chartered have gone external to hire.
Although cost savings remain front and centre of every bank’s activity, there is also the recognition that the institution still needs to generate returns, and deliver maximum efficiency to its clients. The ‘value add’ is critical. As such, whilst there are some well-publicised headcount reductions ongoing, at the same time there is selective hiring to ensure increased wallet-share from clients.
This includes product enhancing hires, as well as senior client coverage individuals. Where reductions are happening, the focus remains on mid-to-senior management positions, especially for roles with less client interaction, or that overlap with other teams and divisions. This has affected a significant number at mid/senior Managing Director level.
The New World Order within financial services has impacted another group significantly: the aspirational Managing Director pool. Historically, many of these would have expected to have been promoted by this point. Many will look upwards and feel somewhat frustrated that there is limited perceived difference between themselves and the MD pool.
However, the barriers for entry to this exclusive club have become increasingly challenging post crisis, with the upshot that many who in earlier times would have been promoted have not progressed. As their time horizon has pushed out significantly, the management of their expectations, especially when there is less opportunity to use compensation as a lever, is a very real challenge.
Where there is seen to be overlap between departments, we recognise that internal ‘mergers’ can be effective. This has been seen between DCM and Corporate Banking, where the combination of these departments results in a holistic CFO and Treasury coverage platform. Mergers of this kind have taken place at the likes of Bank of America Merrill Lynch, Deutsche Bank and RBS. Our understanding is that the trend is likely to continue.
Market volatility has impacted the largest banks more than any others. As such, they have reduced many of their hiring requirements to replacements only. The largest expansion stories seem to remain in some of the mid-sized institutions, who have used this market turmoil to their own advantage. Canadian banks are a great example of a group that has expanded significantly over the past couple of years and continues to do so.
The headcount reduction within the FICC markets is ongoing. We believe this to be a generational shift that will continue for the foreseeable future.
The trend of ‘alternative’ institutions pushing into wholesale markets remains. Whilst we will discuss some of the buyside lenders in a moment, the utilisation of technology within a transaction banking context remains an ever present threat to the traditional players. The most recent example is Western Union Business Solutions developing an SME Trade Finance offering, levering their established client base into a new market for them.
As previously mentioned, we still recognise that there is a ‘brain drain’ of debt bankers moving to the buyside, into infrastructure debt, direct lending and real estate debt funds. We understand that institutions are looking at other areas of debt, such as Emerging Markets, as potential expansion opportunities. Whilst the initial wave of institutions looking to get into this market comprised hedge and private equity funds, more traditional buyside houses are now involved as well, as this offers them reduced volatility and diversification of assets. Those hired generally move from senior lending positions within banking.