Deutsche's results are out. So are UBS's. They are both bad, but UBS's are worse.
In the second quarter, the cost/income ratio at Deutsche's investment bank (its corporate and securities business) was 87%. That doesn't leave a lot of room for mistakes. It makes the 1,000 extra investment banking redundancies suggested a few weeks ago look inevitable. For the moment, Deutsche has trimmed headcount in its corporate and securities business by a mere 179 people since Q1. It's also reduced pay per head at the broader corporate and investment bank by 12% in the first half of 2012 compared to the first half of 2011.
UBS, on the other hand, has reduced pay per head in its investment bank by 18% over the same period. Its investment bank also made a loss in the second quarter, having achieved a cost/income ratio of 108%. Despite the reduction in pay per head, the compensation ratio at UBS's investment bank rose to 63.6% in the second quarter. General and administrative expenses rose, suggesting staff costs are the only real source of cost flexibility. In order to break even at the current rate of pay, UBS needs to get rid of another 1,600 or so investment bankers. M&A and equities would seem a good place to start: revenues in each business were down 48% and 77% year on year respectively in Q2.
The good news
Fortunately, there is some respite from the gloom. While UBS and Deutsche confirm that things are fairly dire, other banks are still doing ok. If you're an M&A banker at UBS and you want to proactively look for some alternatives, they are out there. Try:
The Financial Times reports that Cantor has launched its London advisory business. It's hired 17 people who were laid off in March by Canaccord Genuity and will continue to recruit from the "talent floating around," albeit in lower numbers.
Evercore had a good second quarter and has set aside more in compensation. It's engaged in, "steady and scrupulous recruitment of managing directors" and has said it wants to hire transportation and restructuring bankers in London.
3. Bank of Montreal Capital Markets
In a declining market, Bank of Montreal Capital Markets managed to boost its M&A fees 40% and its DCM fees by 45% in the year to July. It's expanding, but it doesn't appear to be hiring - or at least not for its London office: BMO Capital Markets is advertising 14 jobs, all in the US and Canada.