Bankers specialising in equities and emerging markets will bask in a hiring hot-spot next year, while anaemic business spells job cuts in most other investment banking areas in Europe.
The ambitious recruitment drives of the last year could go into reverse for some, as banks jostle for a fee pool that has shrunk to its lowest in several years. Some banks are already bracing for a year of more firing than hiring.
There is far too much capacity in the market, said one senior equity capital markets banker from a U.S. firm in London, who declined to be named. I would say some (firms) will actually be losing money next year.
Still, London-based recruitment firms say hiring in Europe next year will be on par with 2010 levels, after an increase in capital markets and advisory jobs compared to 2009.
Overall vacancies in the City -- London's financial district and Europe's capital markets hub -- were up by 9 percent in November from a year earlier, according to a recent survey by recruitment firm Morgan McKinley.
Much of that centers around equity capital markets -- where companies raise money through rights issues or initial public offerings (IPOs) -- one of the hottest businesses in 2010, with banks fighting over dealmakers and traders.
Globally, IPOs more than doubled in 2010 from 2009.
Patchy recruitment in that and other areas will continue in Europe, even if firms such as Barclays Capital
People will be watching first-quarter revenues very closely, and that could put the brakes on some plans. But we also expect a seasonal bout of hiring in early 2011 after the bonus round, said one recruitment consultant.
Restless bankers disappointed with bonuses and lured by rising salaries will open up gaps at other firms, while predictions for a 2011 stock market rally make it unlikely that interest in equities experts will subside.
Emerging markets are another area where banks will look to fill jobs, another headhunter said, after surging fees in 2010. This will likely translate into a hiring boom in Asia, but banks could also look to add in eastern Europe and Russia.
FEE DROP HURTING
But the fresh hiring round looks likely to come in tandem with job cuts. BarCap has already emerged as one firm likely to cut hundreds of jobs early next year.
Investment banking fees in Europe dropped to an eight-year low this year, Thomson Reuters and Freeman Consulting data showed this month. Debt capital markets income fell as companies held off borrowing.
Equity deals, which drove the fee pool on a global basis, dwindled in Europe as listings were pulled, even as banks continued to beef up teams, anticipating a pick-up in 2011.
Trading revenues also took a big hit from Europe's sovereign debt worries in the second half of the year, with fixed income one of the worst affected.
At the same time, new entrants on the scene will be vying for business, such as Royal Bank of Canada's RBC Capital Markets
Big recruiters of the last year, such as Japan's Nomura <8604.T>, will be competing with the top firms such as JPMorgan
The post-crisis recruitment drive should still have some way to run before banks revert to chopping mode again, with fourth-quarter results across the board expected to be marginally up on a dismal previous three months.
But with revenues coming under pressure from tighter regulation, banks are steeling themselves for a much more competitive year.
The economics of banking are getting harder, not easier, one senior investment banker at a top European firm said.
The business model is simply less profitable. There will be a huge premium on having scale and being in the top five, but banks that aren't (in the top five) have an interesting decision to make next year -- do you charge now or hold back?
This could turn into a foodfight.
(Editing by Will Waterman)