The other reason banks aren't making cataclysmic job cuts
For all the talk about job cuts in investment banks, it's worth getting one thing clear: it could be worse. Yes, there are thousands of cuts at Goldman Sachs, Morgan Stanley, Citi and Bank of America, but given that revenues were likely down up to 70% year-on-year in areas like M&A in the second quarter, those cuts are hardly surprising.
Today's investment banking index from Coalition Greenwich highlights banks' temperance when it comes to eliminating people. In the first quarter of 2023, the index says combined front office headcount fell by the merest 2%, even as revenues fell by 19%.
Admittedly, many of this year's cuts were announced after Q1, but banks are nonetheless displaying temperance in the face of precipitous revenue declines.
Coalition Greenwich's productivity figures help explain why.
In the first quarter of 2023, Coalition says every individual fixed income salesperson or trader generated revenues averaging $1.7m. It says every equities salesperson or trader generated an average of $1m, and that every investment banker (M&A, ECM and DCM) generated $500k. In investment banking especially, this looks pretty dire given that Q1 revenues per head were nearly $900k back in the glorious days of early 2021.
On a longer term perspective, though, this is still within the bounds of normality. And in fixed income and equities, revenues per head in Q1 were above average.
The chart below (excavated from ancient emails), shows Coalition Greenwich's estimates for Q1 productivity per head between 2014 and 2019. Suddenly, this year doesn't look that bad after all.
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