Thursday, September 22, 2011

The Investment Bank Headcount Indicator Falls Again

BNP Paribas SA, France’s largest bank, plans “significant” staff reductions at its investment- banking unit as the lender cuts total assets by about 10 percent, Chief Executive Officer Baudouin Prot said.

“It’s essentially at our corporate- and investment-banking platforms,” Prot said in an interview on BFM radio today. “It will be a significant magnitude, but without reaching at all the figures announced by other banks, especially Anglo-Saxon ones,” he said, declining to give further details.

Especially those Anglo-Saxon ones, eh Mr. Prot? A mere month or so, this man arrogantly proclaimed, "We're certainly not going reduce" headcount!

But hey, what are words these days, especially in the mouth of a CEO?

We warned, a month ago, that the mass IB layoffs in Europe portended the next big leg down in this worldwide economic mess, and that the last time we saw banks cutting heads so wantonly was in 2008. We said, in fact, "It's 2008, only more so."

Since then, you are probably aware, that has been proven so, and even George Soros is recently on recorded as agreeing. Nouriel Roubini, too, apparently reads this blog, for he has declared it so.

Now then, it is a leading indicator, and eventually it leads so much that the dog catches up with its tail. In other words, eventually there will be no more headcount to cut. It is at this point that the industry (if it hasn't been regulated out of existence) might be once again sensitive to the market's genuine need for capital, instead of just manufacturing crap to stuff into pension funds all over the world.

There are signs already -- two banks have issued credit-backed CLO's for the first time in a while. That suggest either a certain demand for capital, or a replay of the old tricks -- we're not sure which yet. However Mr. Prot's apparent gift for bad timing is a nominal indicator that the worst may passing before us now.


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