For much of the year, 2004 was a good time to be a banker on the hunt for a new job. But some unfavourable winds did blow; read below for all the hot and chilly points on the banking map.
After three years of trimming and consolidation, banks were in expansionary mode. At the end of the fourth quarter, headcount was up more than 5% on the previous 12 months everywhere, from Goldman Sachs to Lehman Brothers, Morgan Stanley, Credit Suisse First Boston (CSFB), and UBS.
But with the end in sight, the hiring party fell somewhat flat. In November and December five banks collectively announced more than 6,000 job cuts. In second-tier banks in particular, leaner times are ahead.
Mass migration: team moves
Symptomatic of banks' business building efforts, there were plenty of team moves during 2004.
The most notable instance of mass migration took place in Germany, where Dresdner Kleinwort Wasserstein (DrKW) lost 10 German bankers to CSFB in July. The haul included four managing directors, one of whom, Martin Korbmacher, took charge of CSFB's business in Germany. Sources close to the matter said DrKW attempted to lift 20-25 bankers with offers of guaranteed bonuses worth a combined 100 million euros ($122 million).
Similarly audacious was Keefe Bruyette & Woods' extraction of 14 analysts and traders from Fox-Pitt, Kelton in April. Two weeks later, four members of Fox-Pitt's Italian group defected to Citigroup. The departures left headcount in its London office down 15%.
Team moves were equally in evidence in the corporate broking sector in April. Morgan Stanley poached five key members of Merrill Lynch's corporate broking team. Two of its remaining brokers then left for Goldman Sachs. There followed a round of retaliatory hiring as Merrill sought to fill its gaps.
Hot sector: equity derivatives
Corporate brokers were not the only people leaking from Merrill Lynch in 2004: the bank also had a hard time keeping hold of its equity derivatives staff. It lost 13 equity derivatives specialists to Nomura in July. Merrill then hired 17 new people to its equity derivatives team in August, before Nomura came back for another seven in early December.
The supreme equity derivatives hirer of 2004 was, however, Barclays Capital. In the course of the year, the UK bank hired at least 30 people in equity linked products and 20 in equity derivatives trading.
Warm sectors: commodities, high yield, FIG
Commodities, high yield and financial institutions group teams were also on the right side of the hiring fence.
Spurred by erratic oil prices and rising demand for just about every conceivable commodity for the growing Chinese economy, most banks built up in commodities trading. In July, DrKW hired Neil Rothwell from RWE, a German utility, with a mandate to set up an energy trading business. ABN Amro hired five staff to its commodities team in August and two in May.
An influx of new investors sparked similar activity in high yield. ABN Amro was first off the market. In March, the Dutch bank brought in James Courtenay to spearhead a return to the junk market. Courtenay helped build the high yield business at CIBC World Markets; he hired five people to the team in June.
Both SG and Calyon decided set up high yield teams in September. Tim Hall, head of non-investment grade debt at Calyon, said the bank will add 10-12 people initially.
Financial services was one of the hottest sectors for European M&A in 2004, with over 25.5 billion euros ($48.5 billion) of deals done in the first three quarters alone. This fact did not go unnoticed by banks: Bank of America, SG, and Bear Stearns were among the main hirers in the sector.
Hot banks: HSBC, Barclays Capital
Moving swiftly on from hot sectors, last year also saw a rush of hiring by a handful of institutions. Barclays Capital beat most records: it added 1,200 staff in London alone during 2004, a 38% increase in staff numbers.
For a few months HSBC became something of a revolving door. Between the last quarter of 2003 and the first quarter of 2004, 700 left and 700 joined according to an HSBC spokesman.
Other top hirers included Bank of America, which added 70-plus to its European debt franchise last year, and Bear Stearns, which announced in June that it planned to recruit 200-300 staff in Europe over the next three years, a 30% rise in staff numbers.
Hot countries: Germany. France, Italy
There were plenty of big name hires in continental Europe as banks sought to beef up with senior investment banking expertise.
In Germany, Citigroup hired Hendrik Hilgert from Deutsche Bank to head its M&A team. Lehman hired two former Goldman Sachs partners, Jerry McConnell and Christian Meissner, for its German investment banking team.
Both Goldman and Merrill reshuffled their German investment banking teams. Merrill appointed Richard Taylor as co-head of German investment banking. Goldman promoted Marcus Schenck, a managing director and partner, to co-head of investment banking for Germany and Austria alongside Alex Dibelius. In December, Goldman also retrieved Dorothee Blessing from Deutsche Bank. Blessing spent 12 years at Goldman and helped build the bank's equity capital markets business before leaving for Deutsche in early 2004.
Equity capital markets spurred hiring in France. In May, DrKW hired Vincent Hubert from ABN Amro to build its French equity capital markets capabilities. Hubert hired five bankers to his team in July.
To get into the French ECM game, Mediobanca opened a new French office run by Marc Vincent, a former managing director at Citigroup. Citigroup filled the gap with Jean-Michel Steg from Goldman Sachs.
And in Italy, CSFB, ABN and SG were among those hiring senior banking talent. CSFB recruited Pierpaolo Arcangioli as head of Italian equity capital markets from Merrill and Luigi de Vecchi as co-head of Italian investment banking alongside Carlo Calabria. ABN hired Paulo Cuccia, chief executive of Accia, the Italian water utility, as country representative of its wholesale clients investment banking division. SG hired Mauro Brunelli as head of Italian M&A.
Cold spots: DrKW, ABN Amro, Commerzbank, Deutsche Bank, JP Morgan and CSFB
DrKW, ABN Amro, Commerzbank, Deutsche, JP Morgan and CSFB put a dampener on the end of the year by announcing thousands of redundancies.
DrKW said it plans 240 redundancies in London, Frankfurt and Asia. The chop will fall mostly on corporate financiers, middle and back office staff and people working in capital markets (ie. almost everyone). The German bank also merged its origination and advisory businesses in July, leading to as many as 100 redundancies, a fact unconfirmed by a spokeswoman.
ABN Amro revealed plans to make 1,350 redundancies in its wholesale banking division, of which 240 will be in the London office. The bank also plans to hire 250 new staff for wholesale banking. A full 1,200 out of 5,000 full-time IT workers at the bank will lose their jobs over the next 18 months under the proposed restructuring plan.
Commerzbank announced 900 redundancies across its investment banking business. Headcount in London will be cut by 50%. Frankfurt staff escaped with a light pruning: 7% will go.
Deutsche Bank announced plans to cut 2,300 jobs over the next two years as part of a cost cutting plan aimed at boosting its flagging return on equity. Most of the departures will be in Germany and in administrative areas like risk management. But 500 jobs will go from the global investment banking unit, and 100 will go from the global markets division. Three global heads of research have left already.
Limbs were also lopped off at Collins Stewart Tullet, the broker which merged with Prebon in October. Patrick Keenan, a Prebon director, co-founder and vocal supporter of the merger, left soon after it was completed. Six other senior staff left: the head of IT, the head of fixed income equities and futures, and the head of global business development also made swift exits. Up to 30 of Prebon's 150 technology staff are thought to have been suspended, and as many as 125 brokers were made redundant. This was despite earlier promises that there would be 'no significant staff reductions.'
In search of fairer weather...
Finally, there were plenty of voluntary departures. Hedge funds continued to exert an allure over bankers of a certain stature. Hence Mehmet Dalman, head of investment banking at Commerzbank, left in October to launch an alternative asset management firm. He was followed by various senior colleagues.
Deutsche Asset Management (DeAM) also suffered a spate of senior exits. Twelve senior executives left during the course of the year. Institutional investors followed suit: over 7.7 billion in assets were withdrawn from DeAM in the three months to September 30. The move prompted 'carnage' as the asset manager slashed jobs in London in preparation for the possible closure of UK and European equities and a move back to Frankfurt.
One of DeAM's previously departed executives made his way to CSFB. The Swiss American bank parted with John Mack, its chief executive in July. In late December it announced Michael Philipp, former head of DeAM, as Mack's replacement. Philipp left DeAM in 2002. Mack eschewed the banking industry and found a new job at Kohlberg Kravis Roberts, the US private equity group.
The first quarter of 2005 should see the now familiar merry-go-round of post-bonus moves, but as to predicting the countries, sectors, and banks where the action will be, stay tuned; eFinancialCareers will be publishing its Q1 hiring survey in January.