Mulsanne Market Overview
Our market overview highlights a stagnation of hiring across banking and markets throughout EMEA, with most houses having reduced headcount through redundancies and merging of desks. Replacement and strategic hiring is evident across larger houses. The key growth area is within Emerging Markets globally.
Whilst the beginning of Q1 saw large scale cuts at some houses in a bid to shed costs, we are now seeing increasing demand for strategic/transformational hires in certain European regions, particularly in Northern Europe, and most notably within sales. We believe that senior managers are currently observing the market dynamics to inform their hiring decisions later in the year.
Bond issuance saw a major boost in January and February and, as a result, a period of cautious growth in hiring appetite is anticipated during the middle part of this year. In DCM the Nordic regions in particular have attracted interest from most of the leading houses and it is here that teams are likely to grow moving into Q2.
The need for headcount reductions has led to the merging of desks at some US houses. High Yield, Loan and Distressed Debt or High Yield and Investment Grade have been integrated to form smaller teams with a broader focus within trading, research and sales. This is a trend that is likely to continue throughout the year.
Although FX enjoyed strong 2011 trading volumes and revenues, largely due to Q3/Q4 market volatility, this was not reflected in Q1 hiring. As with most other asset classes, many banks have made redundancies across sales and trading. Despite the cut-backs, there have been selective key hires at Tier 1 FX banks. In contrast to the 2008 wave of FX redundancies, a noticeable feature this year is the lack of hiring at smaller houses.
Flow rates desks are being restructured as banks strive for efficient operation of their EUR Government Bond businesses. Although headcount is not increasing, especially in Exotics, and teams are being affected by redundancies, replacement hires are being made where senior traders have left; this is evident in EUR Swaps, Inflation, and EUR Government Bonds. In Options there is a trend for growth or greater presence in the market.
For the third consecutive quarter, hiring continued to stall across Europe, with a number of financial institutions having made redundancies at the start of Q1, before and after the compensation rounds. With further cuts expected later this year, hiring managers await market improvements to allow a boost within M&A and Corporate Finance activity. Hires made during Q1 represented strategic replacements with emphasis on client relationships. Emerging Markets is a key growth area, with Latin America and CEEMEA being stand out investment regions.
Redundancies were concentrated in the mid to junior levels of sales and trading businesses, affecting the whole of CEEMEA and occurring in both London and onshore locations. In many cases, this has been part of a wider realignment process as banks adjust their product and geographical focus. We are now seeing hiring plans designed to complete this process; concentrated on origination and sales with a focus on Flow products and Corporates. South Africa and CEE are of particular interest.
Corporate Credit Risk has experienced cuts and the focus is now on upskilling teams to cope with a broader variety of industries with fewer headcount. More buoyant teams in Credit and Market Risk are Emerging Markets, Commodities, CVA and Regulatory Reporting teams, who are considering strategic upgrade hires and expansion in Q2.