London ECM banking jobs hit with horrible chart
If you're an equity capital markets banker in London, and you're hoping to get paid this year, you probably already know that the 2024 UK IPO vintage has not been the best. A chart in the newly released Peel Hunt UK IPO Market Report clarifies that 2024 has, in fact, been one of the worst. - Although it has been a bit better than in the recent past.
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The worrisome chart is shown below. While Peel Hunt is saying things like, "UK ECM activity has remained active post summer," and the UK IPO market is “selectively open,” it also says the UK IPO market is currently travelling a metaphorical speed of only 27mph. This is slow. Peel Hunt says fast would be the equivalent of 50mph+.
Source: Peel Hunt
The sorry state of affairs helps explain why banks have been trimming UK-focused staff. Citi, for example, cut Suneel Hargunani, its UK-based co-head of EMEA ECM in October. Deutsche Bank cut Daniel Ross, the architect of its acquisition of Numis, in late November. Peel Hunt itself made numerous job cuts in April.
However, the extent of any cuts in UK ECM or UK-focused equity research or equity sales doesn't match the extent of the collapse in the UK IPO market. Depending upon your perspective, this bodes either badly or well for 2025.
One senior UK ECM banker tells us that after three tough years, the future for UK IPOs is looking, "very positive" for 2025. "There are still a lot of UK companies that want to go public and if you're a midcap based UK business, you will go public in the UK. I'm not concerned about the future at all," he says. British bankers who've survived so far are well-placed.
Next year, the UK's ECM bankers could be assisted by various initiatives, including the simplification of the listings rules in July 2024. The UK government has also backed the launch of PISCES (Private Intermittent Securities and Capital Exchange System) to allow the intermittent trading of private company shares and to hopefully make it easier for UK companies to reach a scale that may enable them to public.
Not everyone is optimistic, though. Another senior UK banker tells us that while UK IPOs will surely come back, they may forever do so at lower levels than before. "Who knows what the new norm is," he reflects wistfully. A rival at another bank agrees: "London will be back later than Europe based on our pipeline," she says. "- I think there are still a rough few months to come."
On this basis, Numis's decision to sell itself to Deutsche Bank for £410m in late 2023 looks fortuitous. The big question now, though, is whether the chart above will right itself next year or whether banks in London will need to cut costs further to match the new and perpetually shrivelled fee pool.
"Most banks in London are expecting a pick-up through 2025 and 2025," says one ECM head. "They haven't cut the cost base because the expectation is that things will recover." And if they don't? He predicts that ECM bankers will suffer more than sales and research. "It's easier to cut the banker because if there's nothing to originate, they ain't going to originate anything," he reflects.
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