Derivatives hiring picks up

Major banks have begun recruiting in derivatives to rebuild depleted fixed-income teams in recent months, buoyed by record revenues in the second quarter, recruiters say.

A number of banks reported strong investment banking results for the three months to June 30, 2009. JP Morgan, for instance, reported net revenue of $7.3 billion for its investment bank, with fixed-income markets generating a record $4.9 billion of revenue, up by $2.6 billion from the previous year. Deutsche Bank reported net revenues of €5.3 billion for its corporate and investment bank, with sales and trading (debt and other products) generating revenues of €2.6 billion in the quarter, a rise of €2 billion. Meanwhile, Goldman Sachs reported record net revenue of $6.8 billion for its fixed-income, currency and commodities (FICC) unit.

Banks have mainly hired to replenish depleted teams rather than target new growth areas, says Guy Emmerson, associate director at London-based recruitment firm Badenoch & Clark. Some banks slashed employees in certain areas by more than 20% at the height of the crisis, and are now looking to build back up.

Firms that increased their hiring in FICC include Bank of America Merrill Lynch, BNP Paribas, Credit Suisse, Lloyds Banking Group and Royal Bank of Scotland, say recruiters.

UBS has also bolstered parts of its business in recent months, after its fixed-income division underwent a shake-up earlier in the year following a Sfr31.9 billion loss for 2008. Among the recent new appointees is Rajeev Misra, who joined as global head of credit from Deutsche Bank, where he was global head of credit and commodities. The bank also hired Dimitri Psyllidis, who joined as global head of macro in the firm's FICC division, with global responsibility for foreign exchange and rates trading. He was previously European co-head of FICC and a member of the European executive management committee at Merrill Lynch.

Barclays Capital and Nomura have been the most active hirers in equity derivatives, says Dan Hudson, operations officer at London recruiters Execuzen. With the acquisition of Lehman's investment banking business in North America last September, Barclays acquired a large US cash equities business, and has made efforts to bring Europe and Asia into line. In May, Jerry del Missier, president of Barclays Capital, said the bank had hired 450 people in equities in 2009 and planned to hire another 250 by the end of the year - although most of these will not be in derivatives.

Nomura has also been active, and hired 14 equity derivatives sales staff and traders in May for its US broker-dealer business, 10 of which were previously managing directors in Bank of America's equity derivatives team. And in July, Ciaran O'Kelly joined the US business as head of equities, with responsibility for derivatives, liquid markets and prime brokerage services.

The smallest recruitment demands have been for roles within the credit space, says Emmerson of Badenoch & Clark. The main bulk of the interest has been for support and operational functions, especially as a result of counterparty risk concerns and increased regulatory focus on the asset class, explains Hakan Enver, an associate director in Morgan McKinley's risk division in London.

"Many banking financial institutions are looking for counterparty risk analysts with a deep understanding of traded products," says Enver. "There is more emphasis on protecting the bank's balance sheet in the case of default of counterparties to long-term derivatives trades as opposed to just loans. On an equal footing, credit risk quantitative analysts are also in demand to support the underlying model development and calculations of these exposures."

Execuzen's Hudson adds hiring should pick up further across the industry in 2010, once bonuses have been paid. "We are at an interesting time in the hiring cycle, because many banks are now putting together business plans including strategic hiring strategies for 2010," he says. "Most will wait until after bonuses are paid before moving on talent, otherwise they will effectively have to buy people out of current expected bonuses. There will be some pre-bonus moves, but the market will really start to move at the start of next year. Only crucial trading appointments will be made this late in the year."