Investment banks are cutting jobs in equities faster than any other division as revenue recovers at a slower pace than the rest of their businesses and more trading is automated.
Employees on stocks desks fell by 8.5 percent globally in the first nine months of last year, according to a survey by Coalition Ltd., an industry analytics firm. That compares with a 6.6 percent drop in fixed-income workers and a 5.8 percent decrease for origination and advisory functions, the data show.
Banks fired workers in equities after declining trading volume reduced revenue at the same time as the growth of automated stock and options transactions squeezed margins. Trades that require human involvement cost 2.05 cents per share while those done by computer cost 1.08 cent, Tabb Group LLC said. Forty investment banks from Bank of America Corp. to Nomura Holdings Inc. announced more than 68,000 job cuts in 2012, according to data compiled by Bloomberg Industries.
“No matter what happens, the way that the business has been run will be permanently changed by this challenge,” Mike Di Iorio, head of equities at Barclays Capital for Asia Pacific said in Hong Kong Dec. 24. “The sort of changes that are being contemplated in the cash business are changes people were contemplating 10 years ago, in terms of creating a more efficient model and introducing a more thoughtful approach.”
Revenue Lags
Global banking and markets revenue grew 53 percent in the third quarter of 2012, the first increase in a year, according to data from nine banks compiled by Bloomberg Industries. Equities sales and trading revenue rose 6.7 percent in the same period, the slowest rebound apart from advisory services.
Nomura announced in September that it is folding equities execution outside of Japan into its Instinet Inc., the brokerage it acquired in 2006. The Tokyo-based company’s action may result in 200 job losses, according to a person briefed on the plans.
Royal Bank of Scotland Group Plc said in January it was exiting cash equities, the trading of common shares on public exchanges, and failed to find a buyer for its European unit. The Edinburgh-based lender sold units to Jefferies Group Inc. as well as ABN Amro Group NV and agreed in April to sell most of its Asia-Pacific unit to Malaysia’s CIMB Group Holdings Bhd., which retained 331 out of about 600 RBS employees in the region.
UniCredit SpA, Italy’s largest bank, said in June it would scale back its central and eastern European equities business. Equity workers will be among 1,600 jobs Morgan Stanley plans to eliminate from its investment bank in coming weeks, a person with direct knowledge of the matter said last week.
Consolidation