With bonus season in full swing and the numbers not looking pleasant for many within the capital markets, movement of senior bankers of the kind not seen in several years could be on the horizon.
Firms across the major markets are cutting bonuses compared to last year's figures after 2022 earnings confirmed just what a tough year it had been.
Deutsche Bank, Credit Suisse, Morgan Stanley, Goldman Sachs, Citi have already confirmed that bonus pools will be much lower than for the previous year, along with several others.
Lower comp is going to cause some bankers, who will believe they delivered last year, to want to jump ship. It is true that not many banks are hiring at the senior level in capital markets but all it takes is for a couple of people to start their own artisanal crypto-vinyl organic cafe-cum-bicycle shop and all of a sudden there are seats to fill.
To perhaps rub salt in the wounds, the European Banking Authority (EBA)published its annual report on high earners last week, making public its data on bank and investment firm employees within the EU for 2021.
Although the data lags by a year, it shows that there was a record number of earners making over €1m in the bloc over the year. The bulk of those new earners were based in Italy, France and Spain and worked in investment banking, trading and sales.
The EBA report will make for a nostalgic and sobering read after a year when rocketing yields hampered deal activity.
But an increase of 41.5% from 2020 to 2021 — the highest since record keeping began — demonstrates that the industry had been on something of a high in previous years. Remuneration, read the report, is linked to the performance of institutions and staff alike.
That is of little comfort to those whose P&L is being used to subsidise loss-making colleagues, of course.
A survey run by Fishbowlalso suggested that 72% of finance professionals would consider changing jobs if bonuses were cut.
What is there to stick around for? Certainly January has been a roaring start for capital markets, exemplified by issuance in euros reaching an all time high for the year-to-date. As of Friday, €190.7bn of bonds had been priced in the currency, a 16.6% increase on last year’s volume by the same stage, which was the previous record.
But that does not mean the year will be a blockbuster. Indeed, one theory to explain the rampant issuance activity so far holds that issuers are racing to do deals now in the expectation that the markets worsen as the year goes on. Recession, inflation, the war in Ukraine, rising rates, lower central bank bond buying — all loom large as big ticket items that could derail issuance.
That some of the capital markets' best and brightest may look to deploy their talents where they will be better rewarded is almost a certainty. The only question is whether there will be the vacancies for them to move into and enough business to transact when they get there.
Additional reporting by Ralph Sinclair