I know, I know... Q2 was an anomaly, pandemic-related, not gonna happen again. That said, because GS/MS/JPM had such unbelievable trading quarters, do you think this reverses the trend of reduction in headcount in S&T? It just seems so important to these banks, roughly 30-40% of overall revenue... is there a chance headcount EXPANDS due to the clients' obviously heavy reliance on trading, during both good times and bad?
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no, unlike IB which has had to recruit like crazy the last few yers to capture growing fees (human bots to churn out decks), S&T desks were plenty staffed during the last quarter - in fact prolly couldve achieved same pnl with even fewer people, esp in sales.
What about FT offers for SA people? I know we’ll find out soon enough, but do you think the massive revenue generated this year will encourage BBs to increase their FT offers to SAs?
Not really. If anything, this crisis has shown that:
1) Even with less headcount from cost cutting the last 5-10 years, traders can still perform well during the crisis and capture PnL. Why would there be an incentive to hire more if we have proven that more people doesn't necessarily equate to more PnL?
2) Given that most banks have 70-80% of their staff wfh (and have proven that this business can be done whilst at home rather than being on the trading floor), this proves that there doesn't need to be such strong investments in trading floor infrastructure e.g. turrets, advanced computers, having tech teams on standby etc etc
3) For very liquid asset classes like FX, Equities and Rates, the crisis was a great opportunity for banks to test how their electronic platforms perform during a blowup. From the feedback i've seen in my product, 80% of the platform bid/offer was listed as similar to manual traders set width and skew. Tells you all you need re future of automation etc.
Given that most banks (especially European ones) still need to cut costs, if i was a bank CEO, S&T looks like a very good place to do so.....
But what about the BBs here -- you think they'd be reluctant to reduce head count since they might not want to risk that they can't service clients during times of volatility and heavy demand, which we just saw?
They served clients perfectly fine during those times
Well not really, banks still need to cut costs at the end of the day (take a look at DB and HSBC being the two most obvious ones). Evidence has shown that even with less headcount in S&T, the division is still able to perform well during a downturn. Once vols normalise (as they will continue to do), margins decrease and we go back to normal.
Again, if i was a bank CEO, automation trend is obvious 1) and 2) 80% of my S&T workforce is wfh and business is getting run fine, so why do i need to put so much investments on all this trading floor infrastructure? Why should i not just continue to cut headcount?
But why is it assumed that cutting headcount will not cut down on efficiency? I get that they may want to simply maintain headcount... but no fear that cutting headcount will hurt servicing the client? I guess if it does, they can just hire back up again.
If the trend is towards automation, headcounts will keep coming down, wfh or not.
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