European banks are readying more steep job cuts as dismal third-quarter bond and stock trading severely dents income and piles on more pressure to slash costs.
The tally of announced layoffs this year, reaching about 70,000 among Europe's lenders, is set to soar as banks respond to a woeful three months for investment banking and prepare for the traditional year-end cutbacks ahead of the bonus season.
Several are planning to slice away another 10 per cent of their staff in the coming months, recruiters and analysts said.
"There have been cherry-picking redundancies until now, but we are going to see blanket cuts before Christmas," said Jonathan Evans, chairman of headhunters Sammons Associates, pointing to the "significant" quarterly trading losses some investment banks will face.
"The big firms will have to trim until market confidence returns, and the small ones are under the cosh too and some are even disappearing."
Many of the job cuts across banks this year were planned before the third quarter was under way. Since then, hopes for a third quarter recovery have been dashed, with July-September revenues expected to be well down on the second quarter.
Deutsche Bank this week warned that the euro zone crisis would result in significantly reduced revenues in its investment bank, and JPMorgan in mid-September warned that trading revenues were down 30 per cent on the previous quarter and investment banking fees were likely to halve.
A deepening debt crisis in Europe since July has seen trading activity slump, both in equities and in fixed income, currency and commodities (FICC) divisions.
Capital markets business has also dried up in key areas, including previously resilient bond issuance, leaving activity to the end of September down 5 per cent on the first nine months of 2010, according to Thomson Reuters data.
Investment banking fees nearly halved in the third quarter from the previous three months, falling to their lowest level since early 2009, just when lenders were emerging from a deep financial crisis.
Deutsche Bank this week said it would cut 500 jobs in its investment bank. Rivals have cut jobs more aggressively, and some of those who cut earlier could be due another round of layoffs.
"There is another 20 per cent of excess head count to be cut in the industry," said Jason Kennedy, chief executive of financial recruiters Kennedy Associates.
"The cuts have been coming continuously, in dribs and drabs. Those that have already announced layoffs will be planning more."
Investment banks may have cut thousands of jobs this year, but many, including Barclays and UBS , still have more staff than they had at the end of 2008.
UBS is now in the midst of laying off 3,500 people but is a prime candidate for further cuts as it restructures its business in the wake of a rogue trading scandal, UBS insiders and analysts have said.
Many bankers and recruiters said layoffs this year could mark a long-lasting change in the industry, with capacity being taken out now that will not be replaced.
"This time, it's more structural. There will be less hiring for years to come," said one senior British banker.
Some sackings are also seasonal, however, as banks tend to cut back before Christmas to keep pay expenses in check ahead of the bonus season in the new year.
As well as making more staff redundant, banks are expected to slash bonus pools severely and cut salaries where they can.