December 1, 2023

Investment Banking

Let Your Investment Banking Do The Walking

The people banks will hire in 2023. And the people they won’t

Be warned: 2022 is not a year in which to be a mediocre performer on a large salary in a big bank. As banks survey the damage done to revenues, the zeitgeist is for sifting out of underperformers. And when hiring happens next year, it’s mostly likely to focus on one thing: upgrades. 

“2023 will be headcount neutral,” predicts the head of one front office-focused international search firm, based in New York City. “It’s not going to be about growth, but replacement hires and upgrading.”

Naturally, there are exceptions. As JPMorgan’s banking analysts pointed out in a September note, it would be a brave bank that cuts technology investments in 2023; even with the decline in fintech valuations, fintech firms are likely to continue breathing down their necks. Similarly, regulators are squeezing banks (Citi) when it comes to controls. This is probably why, speaking at our recent US roundtable, recruiters were bullish on some technology and data jobs (machine learning and AI, UI and UX) and on some compliance and controls jobs (AML and financial crime). But in the front office, hiring is a different story. 

“There aren’t widespread hiring freezes yet, but it’s tepid,” says the search firm head. “Everyone’s focusing on protecting the bonus pool.” Another US search consultant, who focuses on equities hires globally, says the ax has already fallen on hiring for 2022: “No one’s starting anything new now and anyone already in the process is unlikely to be closed at this stage of the year. Line managers are being told that if they want to hire in 2023, they’ll need to get rid of someone to accommodate them.”

The recent report from Deutsche Bank’s US banking analysts on the outlook for revenues in the front office explains the lack of enthusiasm: fixed income salespeople and traders are having a good second half of the year; they look like the only ones. 

Deutsche Bank’s predictions for Q3 revenues

As revenues are being squeezed, costs are rising. At the organizational level, JPMorgan’s analysts point out that some banks are far more exposed to personnel costs than others: at UBS and Standard Chartered, for example, people accounted for 73% and 74% of costs in 2021 respectively; at BNP Paribas and HSBC it was just 59% and 58% respectively. Nonetheless, it would be a brave bank that embarks upon concerted headcount expansion in a time of rising pay and falling revenues.  

In this environment, the expectation is that 2023 will be all about looking around and establishing who could do the same job as current employees, better, or for less. Moves will still happen. Credit Suisse’s imminent restructuring is expected to lead to a shakeout of its sales and trading staff, some of whom will be of interest to rivals, and might unseat existing staff (Mizuho is embarking upon an expansion of its residential securitization business in America, possibly with a view to enticing CS refugees). Bonuses at top US houses are expected to be a lot lower, and might incline some recipients to try their hands at banks that will choose them over existing employees. But mostly, moves will not be about net headcount growth. They will be about replacing anyone who was weak in 2022. 

None of this precludes hiring new investment banking rainmakers, particularly in the hot areas of healthcare, technology and ESG.  Nor does it presuppose that banks won’t need traders to replace the relentless flow of exits to multi-strategy hedge funds. In all markets, diversity hires will remain a focus. But no one is going to want to hire a middle of the road performer from 2022. Unfortunately, this year’s appraisals are more important than ever. 

Click here to create a profile on eFinancialCareers. Make yourself visible to financial services firms which are more than neutral about hiring in 2022. 

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