The Not So Perfect Storm

Mark Astbury 14.04.2016

As I’m sure many of you are aware, the first 3 months of 2016 have been fairly tough. Several of the big players in the project space haven’t come to the market yet due to what we could call a “perfect storm” of happenings and issues.

Financial results for 2015 were fairly poor for many of the big banking institutions which has knocked their share prices - never a steadying factor. Last year also saw massive changes in leadership across several of the Global Banking institutions. Anthony Jenkins was ousted from the top position for not hitting the board’s cost cutting targets set in 2012 following the Libor crisis, after only 3 years at the helm. Deutsche Bank saw a change to Briton John Cryan in an effort to restore a tarnished image following recent regulatory and legal problems and Credit Suisse saw Brady W. Dougan leave. All of these changes have led to significant restructuring as new strategies and mandates are built out.  

The continued threat of the “Brexit” and the impending US presidential election also loom over the financial services world, bringing with them increased uncertainty. Continued low interest rates and fines have depressed the earning potential of the cash reserves held by these large banking institutions and continued low oil prices threaten many global banks with significant potential loan losses.  Another unexpected factor is the recruitment “merry go round” as disgruntled permanent staff hand in their notice to chase better work following the bonus season. This simply hasn’t happened this year. Perhaps this has happened because of uncertainty in the market, or nervy restructures. Perhaps people don’t see other roles available, so have decided to stick it out until things pick up.  

All of these factors have led to a slow recruitment market. Hiring freezes and cost cutting have seemed to be the buzzwords in most banking strategies, however, there are pockets of hiring. The very regulations which many argue hamper the bank’s ability to make money are ironically forcing them to hire. BCBS239, FDSF, MiFID II, FRTB to name but a few are all driving activity as banks race towards their various deadlines. Compliance too, following a number of high profile scandals, has risen sharply on the agenda for many building large programmes capable of tackling the regulatory burden.  

The tone of what I have said so far has admittedly not been particularly uplifting, but we believe things will pick up in the change world over the next few months. The busiest period might end up being the second half of the year rather than H1. When banks begin cost cutting initiatives the first thing to go is large change programmes, with the mentality of “if it ain’t broke, don’t fix it”. However with the ever changing landscape of the banking sector, everything from system to process to compliance, will inevitably become unfit for purpose. 

While some have been pushed back, tight regulatory deadlines are fast approaching for many of the big players which we would normally expect to drive increases in budget and headcount. Of course there is the ring fencing piece, effectively the creation of two banks under the same name. This will be an enormous piece of work for all of the banks affected and has to be delivered by 2019. Ring fencing will be one of the major initiatives in the banking sector this year, so it’s only a matter of time.

Q1 has been disappointing for many, but everything in this industry is cyclical and change is after all the new BAU. Things didn’t pick up until Q2 in 2015 so we do think the best is yet to come this year and feel there will be a lot of movement in the market from either April or July. It is integral that the banks continue to change and adapt, so any hiring freeze must end. The only real question is.....when?

Mark Astbury's picture
Associate Director
mastbury@morganmckinley.co.uk

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