2021: When front office hiring in investment banks went wild
If you've been paying careful attention, you may have noticed something curious about the kind of hiring happening in investment banks in the past year. After years of pruning headcount and cutting expensive revenue generators, banks have been adding them again. At the same time, hiring for support functions has been heavily pared back.
It's a reality encapsulated by Deutsche Bank, which helpfully breaks out the number of staff who work in the front office versus the middle and back offices of its investment bank. As Deutsche has rebuilt its revenue generation potential, headcount in its front office rose by 4% in the first nine months of 2021 versus 2020; DB's back and middle office headcount was down 8% over the same period.
eFinancialCareers' own data reflects the trend. As the chart below shows, the sectors where hiring has been suppressed this year are all in the back and middle office. The sectors where hiring has unequivocally thrived are all in the front.
Surprisingly, perhaps, generic trading jobs are up the most across all product categories. There is likely some overlap here with rising jobs in hedge funds, FX and equities, and it's reasonable to presume that many of these jobs are in electronic rather than high touch trading. Multi-strategy hedge funds have been hiring on the back of an exceptional 2020, and equities trading has been a strong point in 2021 (Archegos related losses in prime broking not withstanding). Both BofA and Goldman cited strength in their FX trading businesses when they reported third quarter results.
The least surprising number in the chart below is the 54% growth in investment banking and M&A jobs posted to eFinancialCareers in the past 12 months. As deals and IPOs boomed, banks fell over themselves to add execution muscle at the botton end, and originators at the top. - Speaking in October, Citi CEO Jane Fraser said the bank had added 200 senior bankers in "high growth" areas like technology, healthcare, fintech and financial sponsors in 2021. Credit Suisse's new head of the investment bank, Christian Meissner, said the bank hired 1,200 people across all divisions, including 45 dealmakers in key markets.
While jobs are being added again in the front office, costs are being tightly controlled in the middle and back. Our figures show that hiring fell by the most in operations, risk and compliance this year - all areas where banks are trying to automate as much as possible. Surprisingly, perhaps, hiring also fell in technology - but then banks are trying hard to get a grip on technology spending too.
For all the hiring, headcount isn't up by much. Data from banking intelligence provider Coalition Greenwich indicates that total global headcount in both fixed income and equity markets is roughly stable this year compared to last, while investment banking headcount is up jut 1.5%. Anecdotally, people have been leaving some roles as quickly as banks can hire them. - Analyst and associate jobs at leading investment banks are a case in point.