Things are looking decidedly gloomy once again for securities firms. Meredith Whitney predicts banks will pay out puny bonuses for 2010, then start laying off tens of thousands of workers.
Securities firms around the world will cut as many as 80,000 jobs in the next 18 months as revenue growth begins to slow, said Meredith Whitney, the former Oppenheimer & Co. analyst who now runs her own firm.
The reductions, about 10 percent of current levels, will come after 2010 compensation payments, Whitney, 40, said in a report dated Aug. 31 and obtained by Bloomberg News today. The industry's payouts will be “down dramatically,” said Whitney, who started New York-based Meredith Whitney Group after correctly predicting Citigroup Inc.'s dividend cut in 2007.
“The key product drivers of Wall Street's revenues and profits over the past decade have been in a structural decline over the past three years,” Whitney said in the report. “2010 marks the first year in many in which Wall Street-centric firms will go through structural changes.”
Barclays Plc, Credit Suisse Group AG and Royal Bank of Scotland Group Plc may lead a slowdown in hiring in Europe as the fixed-income trading boom fizzles out, recruiters said last month. Barclays Capital's income from trading bonds and commodities fell 40 percent in the first half amid the sovereign debt crisis. Fixed-income, currencies and commodities trading was the biggest revenue contributor at investment banks from Deutsche Bank AG to Goldman Sachs Group Inc.
While regulatory reform, including higher capital requirements, will force some of these shifts, there will be a “deeper secular change” due to declining revenue in businesses such as securitization, Whitney wrote.
Banks around the world cut 330,000 jobs during the latest financial crisis, according to data compiled by Bloomberg. Some have added employees recently as markets recovered. Barclays Capital hired about 3,600 people in the 12 months through June 30, while Credit Suisse hired 1,800 and RBS's securities unit increased headcount by about 1,100.
Even though emerging markets will continue to expand, they won't do so fast enough to offset the declines in the U.S. and Europe, Whitney said.
