At a time when well known investment banks are pulling back on their operations, one major US bank sees opportunities to expand its investment banking business. John Shrewsberry, head of the investment banking unit at Wells Fargo, says it is a great time to hire and expand into investment banking business. “Our eyes are wide open”, he says adding that there are a lot of very talented people at different stages of availability.
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Wells Fargo Unfazed Over Concerns on Losing Focus
Wells Fargo, which is the fourth largest bank in the U.S. by assets and the largest bank by market capitalization, brushed off concerns that expanding into a relatively new area like investment banking could distract its focus from its core business of traditional commercial and retail banking. Shrewsberry says the firm can earn solid returns in investment banking while taking little risk for itself. Currently, Wells Fargo’s investment banking unit accounts for roughly 5 percent of the bank’s total revenue, compared to banks such as JPMorgan Chase, Bank of America and Citigroup which generate closer to 20 to 25 percent of revenue from investment banking businesses. Despite its intention to expand investment banking activities, Wells Fargo hasn’t set specific targets for hiring. Currently, some 4000 employees representing less than 2 percent of its total workforce are in the investment banking division.
UBS to Cut 10,000 Jobs, Credit Suisse Pressured by High Cost of Investment Bank Operations
Meanwhile, Swiss bank UBS is taking on more drastic steps than previously announced to deal with the continuing weakness in the European economy. The bank announced plans to eliminate up to 10,000 jobs, representing 16 percent of its workforce by 2015. Roughly 45 percent of the planned layoffs will be in London, where UBS has a sizable investment banking operation. Remaining job losses would be spread across the firm’s Swiss and US operations. The job cuts will shut down a sizeable part of UBS’ fixed income trading operations, a capital-intensive area of the investment bank. CEO Sergio Ermotti acknowledged that certain parts of the investment banking universe are no longer commercially sustainable. Urs Rohner, chairman of rival Swiss bank Credit Suisse also admitted that its investment banking operations are still too capital intensive but said the firm is not planning a sharp pullback like UBS in its fixed income business.
Job Market to Remain Subdued
It is clear that the underlying weakness in economy is pushing investment banks to closely review their cost structure. With no clear signs of recovery, investment banks are cutting back operations that are capital intensive and positioning themselves to withstand protracted sluggishness in the economy. Firms such as Wells Fargo which have strong balance sheets see the current depressed condition as an opportunity to expand their investment banking operations but the lack of specifics on any hiring suggests that the investment banking job market will continue to remain tepid in the short term.
