Why investment banks’ revenue-generators are getting more productive; and are rates and prime services the only real safe havens?

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Times are tough for investment bankers and job security is, of course, light with most firms hovering their finger above a hair trigger. In fact, 10,000 jobs have been eliminated in the sector over the last year (although this is just 5.6% of total headcount).

For those in revenue generating roles, performance is key and – particularly in the fixed income divisions – things are looking up slightly. Analytics company Coalition has just released its first half review of the major investment banks (BAML, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley, Royal Bank of Scotland and UBS) and is tipping the remaining front office staff to become more productive for the remainder of the year, as the chart below shows.

Fixed income is the main bright spot, but consistent productivity projections elsewhere suggests that banks have, at the very least stripped out underperformers.

This doesn’t, however, imply safety from redundancy. Globally, 23,100 people worked in revenue-generating fixed income roles in 2009, according to Coalition. In the first half, this figure stood at 21,400, which is not a significant drop when you consider the 40% slump in revenues in this division during the second quarter.

Origination and advisory headcount has remained relatively consistent since 2009 – 18,400 to 18,300 – while equities divisions have the most to fear as headcount is up still 500 on 2009 at 19,000. Cash equities were the most likely target for cuts, suggests the report.

The strongest performers in FICC, according to Coalition’s estimates, were Goldman Sachs and Barclays; in equities it was J.P. Morgan and Goldman Sachs and within origination and advisory Citi and Barclays are the top performers.

Are there any safe havens? Within fixed income, the only one appears to be rates. Revenues in this area increased, largely thanks to the market stabilising intervention by the ECB last year, and its share of the FICC division increased from 29% to 36%.

Within equities, the standout performer is prime services, which increased its share of revenues from 26% to 31%. However, this is relative to slumping revenues elsewhere, and can’t be regarded as a truly safe option.

All of this could be a moot point. As we mentioned yesterday, investment banks are tipped to pull out of some businesses entirely, with 30-50% of current headcount potentially on the chopping block. In such a scenario, playing to your bank’s strengths is a wise idea.

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