It's not a great day if you work in investment banking at Morgan Stanley. It's not a great day if you're a London-based banker at Deutsche. But there's some cheerful news if you're unemployed and want to get back into the market.
Today is Morgan Stanley's results day. When Morgan Stanley reported its Q1 results, it was doing really really well in fixed income sales and trading (and Goldman was doing badly). That situation has now changed. Morgan Stanley is doing really really badly in fixed income sales and trading (and Goldman is doing well).
How badly is Morgan Stanley doing? FICC sales and trading revenues fell 50% year on year (at Goldman they rose 37%). Equities revenues at Morgan Stanley fell 30%. Even Morgan Stanley's usually reliable investment bankers didn't do very well - revenues across M&A advisory and capital markets were down 50% too. Profits at the institutional securities division (Morgan Stanley's investment bank) fell 64%.
Needless, this is playing out in compensation. In a densely worded accompaniment to its results, Morgan Stanley explains that it's reduced compensation expenditure in its investment bank to $1.4bn from $2.2bn a year ago - a cut of 36%, far above the 16% cut at JPMorgan and 14% cut at Goldman Sachs. It goes on to say that:
"The current quarter reflects an adjustment of approximately $160 million to reduce previously accrued discretionary above base compensation due to an updated 2012 financial outlook."
This may, or may not imply clawbacks.
So what's wrong with Morgan Stanley's investment bank? It blames, "low levels of activity," "reduced levels of client activity across geographies and most products" and "lower market volume." In fixed income sales and trading there will also be suspicions that it's related to the Moody's downgrade. Morgan Stanley recently made some sales and trading redundancies. Maybe it will make more.
And at Deutsche....
Separately, Deutsche Bank has admitted reality and is going to be making 1,000 investment banking job cuts - most of them in London we understand. Speculation in German circles suggest they will particularly affect Deutsche's London-based ECM bankers.
The good news
The better news is that investment bankers are allegedly a bit more receptive to hiring people who are out of the market. Financial News offers three reasons for this: there are some high quality people out of the market; banks aren't allowed to pay guarantees except in exceptional circumstances and unemployed people don't demand guarantees; top performers currently in jobs are very hard to move.
The new boss of Barclays will be paid a significantly lower sum than Bob Diamond and banned from selling some share awards until he retires. (Sky)
Work all night as an algo trader in Switzerland. (AmsterdamTrader)
Credit Suisse’s share price has lost 80% since Mr Dougan took over as boss five years ago. (Financial Times)
"We do believe there will be a dramatic restructuring of the industry,” said Brady Dougan. (Reuters)
Credit Suisse will be eliminating 138 jobs in Manhattan between September and October. (Bloomberg)
Goldman Sachs has built a physical metals desk over the past 2 years and has just hired someone who recently left Trafigura. (Reuters)
Another tax avoidance scheme declared invalid. All who participated in it will be required to repay their tax. (Telegraph)
Greenhill’s profits fell 90% in the second quarter. Advisory revenue nearly halved.(Bloomberg)
Silverwind Securities, a corporate finance broking house set up by some ex-ABN and ex-Dresdner people, is ceasing trading – except in FX. (Telegraph)
RBC is merging its cash and electronic equities trading groups and people are leaving as a result. (Financial News)
If you want to be a successful trader, you must chew gum and hang around women with snakes. (SquareMile)