Cost Cutting Initiatives – Case Study

March 6, 2017

It may seem that there has been a certain disequilibrium set to motion in the sphere of financial services in general and Investment Banks in specific. While although a new year is bound to bring about new and encouraging changes, it seems to have dimmed those aforementioned possibilities for the world of Investment.

It all began with the “Waterline Project”, which is considered to be a cost cutting initiative of Nomura. The CEO, Koji Nagai Nagai, gave out a statement saying, “The waterline on a warship will rise a centimeter each year if the crew brings excess baggage. Before you know it, the ship would sink.” It has been announced that Nomura will begin ‘trimming’ the staff, which it proposed to do by cutting about 900 heads, beginning April 2016. The said cost cutting has a focus on getting more and more out of the existing employees, in terms of productivity. It would involve overseeing the work passed on to subordinates, by their heads. While on the other hand, the relevance and importance of certain tasks and reports will also be reviewed. Nagai was of the opinion that, “to be honest, this company can do so much to control costs. There will be resistance.”

Another investment banking firm, Credit Suisse, has seemingly taken a similar route. It has already slashed down about 1800 London heads, in the year 2016. According to a report by Financial News, it has reportedly asked all of its employees, that they must pay for their own mobile phones. It is believed that Credit Suisse is bound to cut CHF4.3 billion by the year 2018 and in this process, it seems every little bit helps. Many believed that this year would have things looking in the positive, mainly owing to a couple of good quarters, but it so happens that disappointment is the order of the day. The silver lining here possibly seems to be the fact that 2016 saw fewer job cuts as compared to any other year. Investment pundits believe that banks are on their way to use technology, in order to chip away at the trading floor. It may seem that the glory days are probably breathing their last.

Daniel Pinto, the CEO of JP Morgan’s Investment Bank, stated that he believes they are down by 1% on 2015. The fixed income revenues, which have been tumbling for quite some time now, have seemingly found their base, this past year. Banking Corporations have already begun to allocate lesser resources and staff to their investment banks. This is a telling sign that any rebound in the revenues, is bound to have far less impact on the overall picture, as compared to what it used to in the year 2007.

Meanwhile, the other news snippets on the Investment Bank front include, the surprising fact that Jamie Dimon, happened to be the only bank CEO to buy company stock in 2016. Hedge Fund paychecks have a stark contrast when it comes to paying their Data Scientists as opposed to their Portfolio Managers. While on the bright side, Mergers and Acquisitions are bound to boom this year, especially with Goldman Sachs topping the M&A league this year.


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Evolution of Investment Banking

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