Global investment banking job cuts to ease amid 2024 revenue rebound

Major US and European investment banks are expected to ease job cuts in their advisory and underwriting businesses following a recovery in sector revenues.

Banks trimmed their advisory and underwriting headcount over the past two years as deal-making and capital markets activity plummeted amid rising central bank rates, economic slowdown and geopolitical tension. This followed a post-pandemic boom in business in 2021, which triggered an industry-wide hiring spree.

Revenue-generating front-office headcount at the investment bank divisions (IBD) of the top 12 global investment banks totaled 17,400 as of June 30, 2024, down from 18,400 at the end of 2021, according to data compiled by Coalition Greenwich, an S&P Global company. While job cuts continued into 2024, they are expected to slow later this year as revenues rebound.

"The cost constraints are always there, but I don't think at the moment the cost cutting is coming from firing papers," said Eric Li, head of global banking research at Coalition Greenwich. "It's more coming from how do you control your third-party spending, your travel and entertainment cost."

Coalition Greenwich tracks Bank of America Corp., Barclays PLC, BNP Paribas SA, Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings PLC, JPMorgan Chase & Co., Morgan Stanley, Société Générale SA, UBS Group AG and Wells Fargo & Co.

Brighter outlook

Coalition Greenwich expects IBD revenues, which include money generated from the banks' deal advisory, equity capital markets and debt capital markets underwriting businesses, to grow about 30% in 2024 from the low levels reached in 2023. Increasing revenues would lead to a surge in IBD productivity, which dropped amid the slump in business last year, according to Li.

IBD productivity, measured by dividing total revenues by revenue-generating front-office headcount, almost halved to 1.8 at the end of 2023 from 3.5 at the end of 2021, following a similar trend to revenues, which dropped to $32.3 billion in 2023 from $65.1 billion in 2021, Coalition Greenwich data shows.

In the first quarter of 2024, productivity improved to 0.6 from 0.5 a year ago as IBD revenues jumped 24% year over year, according to the research company's latest investment banking index.

Unpublished Coalition Greenwich data seen by S&P Global Market Intelligence shows IBD productivity grew to 1.2 over the first half of 2024, from 0.9 in the same period of 2023.

As business performance improves amid a brightening economic outlook and expectations for Federal Reserve rate cuts later this year, hiring at large banks should start to pick up, according to Dartmouth Partners, a London-based headhunter specialized in investment banking recruitment.

"Based on conversations with [managing directors] across the market, we're expecting a rebound in M&A activity over the second half of 2024, which is likely to result in further hiring across the Street," the firm said in its 2024 compensation report. With bonuses still low from the cuts made in 2023, "it is still a good time to pick up strong talent in the market," Dartmouth Partners said.

While bulge bracket banks have reduced IBD headcount, those dealmaker jobs have not been lost to the investment banking industry as a whole, according to Li.

"Generally speaking, we see that the majority of this headcount went into different parts of the industry... [W]hen you're looking at the boutiques and tier-two banks, their headcount actually grew during the past few quarters," Li said.