Investment banks could cut 75,000 staff by 2017 - study

Wed Sep 19, 2012 4:35pm IST

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* 2012 investment banking revenue seen sliding 15 percent

* Average return on equity seen at 5 percent this year

* Larger firms urged to expand in emerging markets

* Smaller banks must focus on niche sectors, products

ZURICH, Sept 19 (Reuters) - Up to 15 percent of the 500,000 jobs in investment banking could disappear in the next five years as the euro zone crisis and stiffer regulation hammers revenue, profitability and risk-taking, Roland Berger Strategy Consultants said on Wednesday.

A study by Roland Berger Strategy, one of the world's leading consulting firms, suggests that investment banking global revenue is set to fall by 15 percent this year, while average return on equity could slide to 5 percent from 15 percent in 2010, fuelling the need to cut jobs.

The study's authors said that larger investment firms should protect themselves by bulking up in emerging markets, while smaller players will be forced to concentrate on niche products or client segments.

"Investment banks should increasingly focus their long-term growth prospects on Asia, South America and eastern Europe, but also be prepared for the risk of short-term setbacks in these markets," consultant Markus Boehme said.

Tumbling revenue from stock trading dragged down global investment banks' earnings below year-ago levels in the first six months of 2012, underlining the threat of heavy job cuts in equities departments.

A big fall in dealmaking also hurt revenues, which dropped more than 7 percent to $86 billion across the world's top 10 investment banks despite a recovery for profit engines such as bond trading, analytics group Coalition said last month.

Firms from Morgan Stanley, which in July announced 1,000 more layoffs to meet a 7 percent staff reduction target, to Goldman Sachs are embarking on fresh rounds of staff cuts in their trading and underwriting businesses. Goldman expanded its cost-saving target by $500 million as the outlook has dimmed for near-term revenue growth.

Last week European powerhouse Deutsche Bank said it will cut an undisclosed number of jobs on top of 1,900 cuts already announced and pledged to end a risk-taking culture driven by short-term gain.

Swiss banks UBS and Credit Suisse are in the process of making 3,500 job cuts each.

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