This is what US investment banks really said about hiring in H2
Is that it? Is hiring now all but over at American investment banks until budgets have been reset in January 2023?
Clearly not. Even as the job cuts chatter intensifies, new recruits are arriving and new jobs are being released. JPMorgan alone has launched 2,167 new jobs in the past week, including in openings across quantitative research, machine learning and equity research. Goldman Sachs has released nearly 40 jobs since Monday; Bank of America has released a more diminutive eight roles across its corporate and investment bank in the same period.
Say what you like, it's not a hiring freeze.
Hiring is slowing, but it's a long game
It is a hiring slowdown. Speaking yesterday, Goldman Sachs CFO Denis Coleman said Goldman will be slowing the "velocity of hiring" and that there will be "decreased replacement of attrition." In non-Goldman-speak this means there won't be as much hiring and that when people leave they won't be replaced.
BlackRock, an asset manager rather than a bank, also made some bearish statements about its hiring intentions. "We are delaying certain senior hires into next year," said CFO Gary Shedlin. "Market headwinds" are to blame.
While hiring is slowing, however, firms with strategic plans remain wedded to those plans.
Bank of America, for example, appears to have no regrets about hiring 60 people in EMEA fixed income trading this year. It said yesterday that it was "rewarded" for that in Q2 as fixed income sales and trading revenues rose (even though they rose by less than at some rivals).
Similarly, Citi CEO Jane Fraser indicated no intention of pulling back from her strategy of hiring managing directors into the investment bank, as outlined at the bank's March investor day. "We are continuing to strategically invest in talent and in the platform. You can expect us to continue doing so with a particular focus on the tech, healthcare, and financial services sectors because those are ones where it is a decade-long shift that we're going to see in their importance," Fraser said during last week's investor call. This was despite the fact that M&A revenues in all three sectors were down dramatically in the first half of this year, according to Dealogic. Citi's ongoing enthusiasm for hiring is evidenced by the arrival of Sucharita Dasa, an MD in clean energy investment banking who's just arrived from Barclays (where she was promoted to MD last year), or Jenner Kietz in leveraged finance from Deutsche Bank.
Morgan Stanley CEO James Gorman also says the bank is investing in banking and bankers. Morgan Stanley isn't investing on the basis of the "terrible" last few months, said Gorman: it's about "the next ten years." Nonetheless, he conceded that Morgan Stanley is also engaged in a "pretty systematic review of the prioritization of all the projects going on around the firm," implying that some projects may get postponed.
At JPMorgan, CFO Jeremy Barnum indicated that there's no planned slowdown in strategic hiring plans. Costs are still expected to come in at $77bn across the bank, said Barnum. If anything Barnum said headcount might increase "at a faster pace as we kind of have ramped up our hiring capacity." The implication is that JPMorgan has more recruiters than it did before.
Like Gorman, CEO Jamie Dimon said it's about the long term: "In 15 years, the global GDP — or 20 years, the global GDP, global financial assets, global companies, companies over $5 billion will all double. That’s what we’re building for. We’re not building for like 18 months."
Technology and controls are still a priority
Credit Suisse is trimming its technology budget but US banks are still making bullish noises about hiring engineers. At Citi, technology spending was up 14% in the second quarter and the bank now has 9,000 people working in risk, controls, data, and finance. "We've been actively investing in technology to improve automation and hiring people to stand up these efforts," said Mason last Friday.
At JPMorgan, Dimon declared that it's stupid to engage in "stop-starting on recruiting" or technology spending. "That's crazy. We don’t do that. We’ve never done that. We didn’t do it in ’08 and ’09," he insisted last week.
Hiring to cut costs
Lastly, it's worth remembering that in some cases hiring can itself be a route to cost-cutting.
BlackRock helpfully outlined how this approach works. Jobs at BlackRock are being "juniorized" where possible, said Shedlin, adding that the entirety of this year's headcount growth at BlackRock will be at junior levels, and that 40% will be in "hub" (ie. low cost) locations.
As the slowdown bites, it makes sense to hire, but to hire cheap people.
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