The Financial Times reports that 'investment banks are set to shed another 40,000 jobs in the next few years on top of cuts that have already been announced – and at least a third of them are going to give up their global ambitions, a sector report predicts'.
The report, by strategy consultants Roland Berger, suggests that firms will need to undergo structural change and that fewer expensive senior bankers will be required as revenues in previously key areas dry up.
'Three to five years from now, we expect fewer than ten truly global players to remain. Perhaps only five will maintain a full-scale model across all major products and regions', the report says.
Bloomberg reported last week that Wall Street firms must slash pay and headcount and shed almost a third of their trading-business assets to earn even half the returns they once made, according to Sanford C. Bernstein analysts.
So-called risk-weighted assets at U.S. banks have to shrink 33% and European lenders must slice 28%, Bernstein analysts led by Brad Hintz and Chirantan Barua wrote in a note to clients today. The firms also must cut their compensation ratio to 40% of revenue from 50% by firing high- paid managing directors and replacing some traders with computers, they wrote.
'This implies that the industry is likely to shrink, and more firms will ultimately need to follow UBS to the exit', the analysts wrote, referring to the decision last month by UBS AG (UBSN) to scale back its trading businesses. 'Over the next few years we expect rampant consolidation'.
More investment bank job cuts expected (subscriber content)
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