If you work in J.P. Morgan’s (vast) fixed income team, you’ve every reason to feel a little smug. While most investment banks have started culling – and more cuts are expected, particularly in FX – J.P. Morgan has so far resisted swinging the axe. As recently as January, CFO Marianne Lake said J.PM. had no intention of making fixed income job cuts and was instead ready to seize share as other banks retreat.
Now it seems that's all changed. Daniel Pinto, CEO of J.P. Morgan’s corporate and investment bank, says ‘efficiencies’ are on their way in FICC.
J.P. Morgan will “adjust headcount to represent our assessment of current and future business potential” within its fixed income business, says Pinto in a presentation that's already been released online and scheduled to be made later today as part of J.P, Morgan's investor day.
As Pinto's comments feature under a section focused on reducing fixed costs, this clearly means job cuts.
Given that J.P. Morgan is in the top three in every business area within FICC, its new pursuit of efficiencies is effectively saying that every bank will be making job cuts in some form. J.P. Morgan’s FICC revenues were flat last year, compared to an average decline of 11% across the market. However, over the past five years, its revenues have gone down by 18%.
If you wanted to single out one area for cuts, commodities seems obvious. Charts from Pinto's presentation (shown below) suggest J.P. Morgan’s commodities division isn’t meeting its cost of capital, while credit is barely scraping by and rates traders don’t look overly safe.
How deep the cuts will be is yet to emerge. It's unlikely to be on the scale of Morgan Stanley, which cut 25% of its fixed income headcount towards the end of last year.
Speaking at the beginning of J.P. Morgan's investor day, CEO Jamie Dimon said that the company "didn't really have expense targets" and that it "gets rid of waste and adds value all the time".
And while J.P. Morgan cuts its traders, it’s been investing in senior investment bankers and bringing in new talent. Pinto says the bank will still be hiring in IBD, particularly in the APAC region.
Photo: Chip Somodevilla/Getty Images News/Thinkstock