Another bank is making a few redundancies in sales and trading. Frankly, though it's time some big cuts came to investment banking

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Mostly going down

Morgan Stanley's ongoing redundancies aren't exactly a surprise. We revealed that it was planning to make 1,600 redundancies last December. Then there were reports of 100 "international job cuts" in June. Now we're apparently down to the last 33 of those cuts, with the Financial Times reporting that this number of sales and trading staff will be leaving Morgan Stanley in the Middle East and Asia very soon.

So far, so predictable. Sales and trading revenues are widely expected to have fallen in Q2. Kian Abouhossein, JPMorgan's banking analyst, foresaw as much back in May. But how long before M&A and capital markets investment bankers get let go too?

It's worth asking, because M&A and capital markets activity is looking poor, particularly in Europe.

Hence, Dealogic's M&A snapshot for June, released yesterday, reveals European targeted M&A was at the lowest level since 2004 last month. In the first six months of the year completed EMEA M&A deals fell 43% year-on-year according to Thomson Reuters. Imputed fees from Euro bond issuance were down 15%. And imputed fees from EMEA equity and equity-linked issuance fell 53%.

There have been some clear losers and some clear winners. Barclays and BofA have soared up the M&A league table. Gleacher, Moelis and Sberbank have also done rather well. JPMorgan, Credit Suisse and Citi have been among the big M&A fallers. JPMorgan and SocGen have done well in equities issuance. Morgan Stanley hasn't.

There are always some glimmers of hope: Walgreens' $6.7bn bid for a 45% stake in UK’s Alliance Boots helped drive UK announced M&A 85% higher in June. Walgreens is being advised by Lazard and Goldman Sachs. Alliance Boots has gone for the boutique Centerview Partners, underscoring the threat success of boutiques in seizing M&A market share.

On the whole, however, investment banking businesses have suffered fewer cuts than sales and trading businesses. We looked at the reasons for this back in April: M&A and capital markets are long term relationship businesses; banks are loathe to cut people until it becomes absolutely necessary.

Unfortunately, that moment of necessity is drawing near.

EMEA completed M&A, league table Q2 2012

Source: Thomson Reuters

EMEA equity and equity-linked deals, Q2 2012 


 Source: Thomson Reuters

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