2021 was kind to most investment banks and financial services professionals, and if you work in the industry this beneficence should be on display when bonuses are awarded in the next few weeks. But what goes up is always in danger of going down, and after a heady 12 months, some areas of the industry are looking a little frothy. Others are likely to remain in their state of excitement for the year to come.
A good year for jobs banks geared towards macro
2022 should be a good year for macro traders on FX and rates desks. JPMorgan's banking analysts have been making positive noises about the potential for macro revenues next year. As quantitative easing slows down and central banks debate raising interest rates (or actually increase them in the case of the Bank of England), volatility, client activity and macro revenues are likely to increase. Hiring for macro desks should benefit.
Another exhausting year for M&A bankers
2021 was an extraordinary but exhausting year for M&A bankers, most of whom crawled across the finish line and are wondering how they could do it all again. At $5.8tn, deals were up 54% on 2019 to their highest levels ever as businesses reconfigured for growth in the post-COVID era.
JPMorgan's analysts are predicting that overall investment banking revenues will slacken off a bit in 2021, but M&A activity is expected to remain more buoyant than deals in equity and debt capital markets. M&A headhunters expect to remain busy, with jobs growing fastest in emerging sectors like fintech, sports and gaming.
Senior M&A bankers are optimistic about 2022. Stephan Feldgoise, the global co-head of M&A at Goldman Sachs, told Business Insider: "If we look at our forward indicators that we use to determine new potential mandates, M&A activity is not slowing." Vito Sperduto, co-head of M&A at RBC Capital Markets, pointed out that even if M&A is down 20% in 2022 versus 2021, it will still be the second-best year for M&A bankers ever.
But a bad year for jobs elsewhere on the trading floor
While M&A bankers and macro desks do well, 2022 could be more challenging for other areas of the trading floor. As interest rates rise, JPMorgan's analysts are predicting "normalization" in credit trading revenues, which they expect to decline by 8% between 2021 and 2023. Deutsche's European banking analysts are sounding a similarly cautionary note for credit revenues. Meanwhile, equities trading revenues are expected to fall relative to a buoyant 2021.
This can be expected to impact jobs and hiring on the trading floor. It could also encourage churn as traders try to best position themselves for a potentially challenging for years. Some teams have already undergone big changes in 2021 (eg. Deutsche's global emerging markets team had around 15 exits in 2021 and a bigger number of new joiners) and will be bedding-down in a challenging period. However, the good news according to Deutsche's banking analysts is that most of the margin pressure resulting from the electronification of traded products has already passed.
Everyone will want to work for a U.S. bank
If you didn't want to work for a U.S. investment bank already, you will when bonuses are paid for 2021. Goldman Sachs and JPMorgan are thinking of increasing their bonus pools by 40% to 50% compared to 2020. Top European banks like Deutsche and Barclays are thinking of more like 20-25%. Some banks, like Credit Suisse are expected to cut bonuses. Others, like HSBC are in danger of disappointing once again. This is a structural issue - U.S. banks have the best electronic trading systems are the greatest propensity to make money and pay their staff. They're also strongest placed in the booming M&A market.
A difficult year for Credit Suisse
Rival banks spent the closing months of 2021 queuing up to point out what a hard time Credit Suisse is going to have in 2022. JPMorgan's analysts say Credit Suisse is likely to have the "most challenging" time of all banks next year, due not only to its restructuring plans but to its exposure to declining credit trading revenues.
It won't help that Credit Suisse plans to reduce the capital it allocates to its investment bank from $13bn in in Q3 2021 to US$11bn in 2022, before increasing it again to $13- 13.5bn in 2024. UBS's banking analysts are predicting that Credit Suisse's equities revenues will fall by 45% in the coming years, due - in part - to its withdrawal from prime services. They suggest that "attracting and retaining talent" could be an issue.
Prime broking staff will be hot property (even if they come from Credit Suisse)
Credit Suisse may not want its prime broking staff, but this can't be said for other banks. With prime broking seen as a key driver of equities sales and trading market share, banks like BNP Paribas, Barclays and Bank of Montreal are strengthening their prime broking businesses. Barclays has just hired John Dlubac, a senior prime services salesman at Credit Suisse in the Americas. Bank of Montreal has hired at least 10 people who left BNP Paribas, including Bob Luzzo the former head of Americas prime broking.
ESG jobs will boom
ESG jobs in finance were already booming, but in 2022 they will boom more. Deutsche Bank says that ESG bond issuance is posed to go mainstream next year and notes that the holdings of ESG bond exchange-traded funds have tripled to over $45bn since the covid outbreak. These are the jobs you could be doing in ESG. These are the qualifications you need to get them.
Crypto jobs will boom
If it's not ESG, it's crypto. As we've noted, major crypto players like Coinbase, GSR and Galaxy Digital are all hiring hundreds of people. So are banks like Citi. Hedge funds like Brevan Howard are increasing their exposure.
"Blessed is the geek, for he/she shall inherit the earth. Or if not the Earth, then huge salaries for their development skills. Solidity, Rust, Python, Golang - now is the time to cash in. These are heady, lucrative days for techies in the Crypto age - with no end," says crypto recruiter Rob Lycett.
Mike Burton, another crypto recruiter, predicts the outflow of "mainstream financial markets talent" to crypto will turn from a trickle to a torrent in 2022. "The necessary skill sets will broaden out to include solution sales skills and fund of funds and asset allocation experience for the growing DeFi index markets and duration experience across DeFi. It’s the next stage of the evolution of the ecosystem," he predicts.
Private markets jobs will boom
The recently released new managing director lists at European banks highlighted the importance of private markets talent in 2022. Credit Suisse, for example, promoted Jerome Wallace in New York and Sprague Von Stroh in San Francisco. Barclays promoted Brooke Parker in New York.
Financial News says banks have been rushing to hire for private capital markets teams, which are seen as a key area of growth as they compete to fund companies in the tech sector.
Metaverse jobs will emerge
It's early days, but 2022 will be the year that the finance industry begins to get to grips with the metaverse. Hedge fund Point72 is already advertising for a metaverse research engineer to look at, "the likely impact of digital reality/metaverse and human augmentation interfaces on financial services and the asset management industry."
Diversity hiring will remain a massive deal
If you thought diversity hiring would dwindle in 2022, you're wrong. "It’s very simple, in 2022 it will all be about ESG and diversity recruiting," predicts headhunter Joseph Leung. "This will be the year when we see which banks are really serious about it or just talking the talk."
Most banks have long term diversity targets which are wildly optimistic. In the UK, the Financial Conduct Authority is due to release the results to its diversity discussion paper, followed by likely policy changes to permit comparisons of diversity across banks. Diversity metrics are then expected to be integrated into British banking regulation.
In banks, rising costs will squeeze unproductive MDs
With revenues ever so slightly going off the boil and banks promoting some of their biggest MD classes ever at the end of 2021, 2022 will not be a bad year to be an established MD who's not producing. Most banks have cost reduction plans in 2022 as they attempt to offset technology investments and compensation inflation. - If you're expensive, watch yourself.
Ongoing pressure to move traders to Europe post-Brexit
U.S. banks like Goldman Sachs, JPMorgan and Morgan Stanley say they've mostly finished moving people out of London and into Europe. The European Central Bank has different ideas. - It's pushing for banks to move more risk-takers (traders) into European centres and there are suggestions that migration out of London could hot-up in 2022 as a result.
Talent will be drained from banks
With crypto and fintech jobs booming, banks will face increased competition for talent. "Who wants to work in a boring bank when you can work for something far more exciting," observes one jaded London headhunter. Mike Karp, CEO of search firm Options Group in New York, says talent will keep migrating out of banking and into crypto, fintech and tech firms.
More pressure to keep key staff happy
In combination, high M&A revenues, moves into crypto, moves into fintech and moves into tech (Patrick Marcus, a senior strat at Deutsche Bank in Germany has just moved to Salesforce, for example) mean banks will need to work hard to keep staff happy in 2022. This means high pay. It also means continued pressure to cut hours and improve working conditions. Employees have the whip hand.
Photo by Hulki Okan Tabak on Unsplash
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