Investment banking downturns are always quickly followed by cutbacks. Since the credit crunch started in August 2007, there have already been many redundancies and high-level departures. However, there are many more to come – apart from in the still rampant emerging market businesses. As predictions of the likely length of the financial crisis and the negative impact it will have on investment banking revenues increase, so bankers’ hopes for their own prospects correspondingly plummet.
When they ponder the parlous state of the markets this summer, many bank officials, particularly in fixed income, will be seriously weighing up their options in the face of a level of job insecurity not seen since the dotcom bubble burst in 2001. In fact that is probably understating the scale of the problem. Most comparisons for the current market dislocation go back further than a decade – at the very least back to the 1994 bond bear market. However, many see more ominous parallels such as the 1929 Great Crash. Whatever comparison is most appropriate, there are tough times ahead.
Many – those still able to make a choice, and of sufficient level of seniority (and with enough cash in the bank) – will be pondering whether it makes sense to continue to toil in such tough conditions. For the individuals in question, factors such as bank balance, age, ambition and family commitments all come into play.
For others the choice is different. They were early casualties of the crunch – taking the blame for the market’s dislocations and the losses incurred. So, in addition to the various chief executives who have lost their jobs in the past year – who mostly will spend the next few years becoming extremely well acquainted with their local golf courses – there are also many capital markets chiefs, and divisional heads of credit trading and origination, who have probably got to see more of their friends and family of late than they have in a long time.
The rewards of banking at the top level are such that many of the high-profile names that have departed can afford not to work again. Those that still have appetite for banking, many of whom are still relatively young, will be taking some time out – perhaps a year, maybe even longer, to weigh up their options.
 |
"The environment where anyone can leave a big firm and say ‘I wanna start a fund’ and have people throw money at them is clearly over"
Grant Kvalheim |
"I told people I intend to take some time off and that is what I’m doing," Grant Kvalheim, former co-president of Barclays Capital, tells Euromoney. After seven years building and running Barcap’s credit business, Kvalheim left the UK bank at the start of this year. "I guess part of my thinking was that this would be quite a difficult year, as it has proven to be. At some point in future I’ll get tired of what I’m doing and figure out how and where and when to reconnect but, quite frankly, I haven’t even thought about it yet," he says.
He, like many others in a similar situation, is taking time to be with his family and on personal interests. It is something that many other bankers have decided to do.
Michael Raynes ran Citi’s structured credit business for a little over a year before leaving the bank in late 2007 (before that he was a seven-year veteran of Deutsche Bank). He tells Euromoney he is taking a year out of the business before considering his options but says it is unlikely he will return to banking.
Some have been keener to step back into the markets. Tom Maheras, who ran capital markets at Citi until the autumn of 2007, was rumoured to be close to joining Bear Stearns in the early months of this year, a move spoiled by Bear’s rapid demise in March. It remains to be seen whether he will return to banking or, as seems most likely, establish a hedge fund.
Osman Semerci, who ran fixed income, currencies and commodities at Merrill Lynch for only a year before taking part of the blame for billions of sub-prime and ABS CDO losses, has already decided to take a senior job at Duet Group, an established hedge fund. The alacrity with which Semerci moved makes a lot of sense. He is a young man, with many years ahead of him. And in general, once an individual is out for much longer than a year it becomes harder to obtain a decent role.
Poacher turned gamekeeper
That makes the return to banking by TJ Lim all the more remarkable. When he speaks to Euromoney, Lim admits to being surprised about his appointment as co-head of markets at UniCredit’s markets and investment banking (MIB) division. He was tired of banking when he left and never thought the right opportunity would entice him back. Lim’s last senior banking role was head of international debt capital markets at Merrill Lynch in May 2002. His move to then establish a capital markets advisory firm was unusual because so many people at the time were off establishing hedge funds. Lim spent five years running NewSmith Financial Products, the credit advisory unit of NewSmith Capital Partners. He set up the boutique with several of his old colleagues from Merrill Lynch. Their aim was to help borrowers and investors repair their balance sheets post the dotcom bubble.
|
"I believe that over the next few years the whole landscape of banking will be reshaped"
TJ Lim, UniCredit |
 |
Having gone down the route of giving up poaching to take up gamekeeping, Lim is now back to poaching. As co-head of markets at UniCredit, he will look after fixed income and currency, global credit and sales. Six years is a long time in investment banking. Its an even longer time to be out of banking and return – to Europe’s third-largest bank – with a loftier title than before.