At first sight, JP Morgan's results scream one thing: this is a very good year to be a banker.
Not only are third quarter profits across the bank six times higher than last year, but investment banking profits for the first nine months have quadrupled. OK, investment banking headcount is down 6k year on year (mainly due to the elimination of surplus Bear staff) and 935 quarter on quarter, but pay is up.
On closer examination, however, the great times are not universal.
Where not to work
If you're working at JP Morgan in the current circumstances, you may not be infused with pleasure if you're in:
· M&A advisory
If there's been a recovery in M&A, no one told JP Morgan. Despite the much trumpeted upsurge in dealmaking, advisory fees fell 33% in the third quarter compared to the same period of 2008. Admittedly, this was in line with the market (global M&A activity was down 41% over the same period), but it still doesn't look great.
"There's no advisory business at all. Advisory activity is beautifully correlated with rising GDP, and there aren't a lot of places where GDP's rising right now," says Brad Hintz at Sanford Bernstein.
· Leveraged finance
JP Morgan actually booked a $400m gain on 'legacy leveraged lending' in the last quarter. However, the balance sheet for its investment bank includes $4.89bn of 'non-performing loans retained' (up from $404m in 3Q08). These are good times to be in the business of restructuring non-performing loans. They are not good times if you're a leveraged financier waiting for a return to the good old days.
Where to work
By comparison, happier JP Morgan bankers are to be found working in:
· Prime broking
Having acquired Bear's prime broking business, JP Morgan has been one of the big beneficiaries of the rush to diversify across prime brokers. The bank reshuffled management earlier this year in anticipation of growth and cited prime services as one of the big drivers of equities revenues in the past quarter.
· Equity capital markets
M&A may be in the doldrums, but ECM isn't. Third quarter revenues were up 31%.
· Flow sales and trading
JP Morgan sealed its reputation as a 'flow monster' in the past quarter. Fixed income revenues held up quarter on quarter and increased $4.2bn year on year, suggesting tightening spreads haven't put a stop to the flow party just yet. Revenue increases were achieved in both fixed income and equities sales and trading, without a corresponding increase in VaR (Goldman Sachs, take note).