Three different City brokers showed the strain they are under today, prompting fresh talk of mergers within the Square Mile that could put hundreds of jobs at risk.
Numis, an upstart investment bank regarded as one of the City’s recent success stories, said investment banking revenues would be lower due to a lack of deals. It warned that there is unlikely to be “a meaningful change in market conditions in the short-term” and that flotations will remain scarce.
The City did well during Covid as clients sought advice and fund raising. Lately, they have been cautious, leading to a shortage of IPOs and stagnation in the London market.
Even the biggest players such as Goldman Sachs have warned that up to 5% of jobs must go and bonus pots will be cut by up to 40%, the worst outcome for bankers since the financial crash of 2008.
Peel Hunt, which reported a 99% fall in half-year profits in December, today warned that capital markets activity is at “historic lows” and that full year revenue will be around £82 million, compared to £131 million last time.
Peel Hunt itself floated in September 2021 after a boom in pandemic trading. The shares have more than halved since then and were down 3p to 103p today.
It said: “Administrative expenses increased following our IPO, as expected, and we have continued to face inflationary cost pressures. Notwithstanding actions taken to rationalise costs, we expect the business will now be marginally loss making for the full year against market expectations of broadly break even.”
WH Ireland, the AIM listed broker, joined the pity party, saying that “trading is now below previous management expectations”.
It was fall to a loss of more than £2.2 million this year due to “the widely reported lack of transactional activity across Capital Markets throughout 2022”.
Last week Cenkos and finnCap merged to create a new small cap broker that was widely seen as a sign of things to come for brokers.
Its rivals are not talking of job cuts yet they seem likely.
At the other end of the market, the takeover of Credit Suisse by UBS seems nearly certain to lead to job cuts of perhaps 2000, say analysts.
