Given that 2020 was a record year for banking revenues, you might think that banks would have increased headcount, or at least paused cuts.
New research from Coalition Greenwich shows that although 2020 was a standout year for global banking revenues, with $194m in total revenues generated, and a huge $98.3bn in fixed income, currencies and commodities (FICC) revenues, headcount kept falling in the front office.
Investment banking revenues by business
Front office headcount by business
By virtue of the decline in headcount and increase in revenues, Coalition says - predictably - that productivity per head increased dramatically. In FICC businesses, the average employee generated $6m (up from $3.8m in 2018) in 2020. In equities, they generated $3.1m, up from $2.6m in 2019. In the investment banking division (IBD) they generated $2.9m, up from $2.3m a year earlier.
Before, when banks would regularly pay their people 50% of revenues, these kinds of productivity numbers would have generated big increases in bonuses. Today, though, compensation is more likely to be just 35% of revenues, and while bonuses at many U.S. banks rose in 2020, the increase was in the range of 10-20% rather than anything more.
Within FICC, Coalition says G10 rates, credit, G10 FX, EM Macro, securitization and commodities trading all had an excellent year. The only area that didn't was muni bonds, where trading losses at the start of the year had an ongoing effect. Separate research from Greenwich Associates showed that a growing proportion of fixed income trades during the pandemic took place electronically, which explains declines in headcount. - Mizuho, for example, made big cuts to its London high touch rates sales business this week, while it prepares to push into electronic trading instead.
If you work in the market, the implication of 2020 seems to be that even in good years, your job security is not assured. There are fewer and fewer jobs to go around. However, if you can get one and keep it you should generate more money and may even get paid more - even if you do take home a diminishing proportion of your pnl.
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