Wall Street Headhunter: "I Haven't Seen Morale This Bad Since The Titanic"

Tyler Durden's picture


Say what you will about the quality of financial earnings in 2013 (and we have said quite a bit, making it very clear over the past three quarters that a substantial portion of financial "earnings" has been accounting gimmickry such as loan-loss reserve releases and other "one-time" addbacks which mysteriously end up becoming quite recurring), but one thing that is indisputable is that of the nearly $52 in non-GAAP, adjusted S&P500 EPS so far in 2013, over 20% is attributable to financials.

This can be seen on the charts below, showing the breakdown of S&P component industries to the S&P500's bottom line, as follows:


And Q2:

In other words nearly $11/share of the $52 in S&P500 EPS in the first half of 2013 is due to financial companies. While we don't have the industry breakdown by sector for third quarter expectations handy, it is once again roughly in the 20% range.

Which may be a problem.

As we reported first in July (and again on subsequent occasions), one of the most dramatic events to take place in Q3 as a result in the blowout of rates on Tapering fears, was the sudden and precipitous collapse in the value of unrealized gains (or rather losses) on available for sale securities held by banks due to soaring yields and plunging fixed income prices.

But while this major adverse impact to bank capitalization was immune from also hitting the bank income statement due to the special treatment of Available for Sale Securities courtesy of FAS115, something else did impact the income statement.

As we also reported first two weeks ago, the unprecedented plunge in fixed income profit in Q3 as indicated by early reporter Jefferies, foreshadowed something very bad is coming.

The revenue collapse, according to CEO Dick Handler, was due to "rising-rate environment, spread widening, redemptions experienced by its client base which "heavily muted trading," and related mark-to-market write downs." In other words: a perfect storm.

Days later, first Citi, and then virtually all other major banks warned that they too will suffer comparable drops in fixed-income revenues and profits. As in Jefferies' case this is due to pushing writedowns through the P&L, to a plunge trading volumes, to an illiquid market, to client redemptions and due to demand for mortgage originations and refinancings grinding to a halt. In some cases, like JPMorgan, the pain will only be magnified as banks have to take massive legal reserves, which will further crush actual earnings, although bank analysts will surely bless these as "non-recurring" as usual (even if they are now about the most recurring component of JPM's quaterly performance), and thus allow them to be excluded from Non-GAAP bottom lines.

However, one thing is now abundantly clear: 2013 is now one big scratch for bankers who were expecting that this year bonuses would finally pick up from the prior several years mediocre performance and catch up to the record days of 2009 (just after the biggest wholesale bank bailout in history).

The WSJ summarizes the situation best:

"I haven't seen morale this bad since the Titanic," said Richard Stein, a senior recruiter at Caldwell Partners CWL.T -3.41% who specializes in financial services.

And if bankers are not happy, nobody else will be (here's looking at you dear perpetual banker bailout ATM known as US taxpayers).

New troubles are piling up for U.S. banks as they prepare to release third-quarter results amid warnings of weak trading revenue, a sharp decline in mortgage-refinancing activity and rising legal costs.


Analysts are scrambling to ratchet down earnings estimates ahead of the reports. J.P.Morgan and Wells Fargo are slated to post results on Oct. 11, with Citigroup Inc., Bank of America Corp., Morgan Stanley and Goldman Sachs Group Inc. due to weigh in the following week.


Poor results could prompt additional job cuts and worsen the already downcast mood on Wall Street, bankers and recruiters said.


The effects of slowing mortgage demand, weak trading revenue and higher legal costs are being felt far and wide.


Analysts reduced revenue estimates for the six largest U.S. banks during the quarter and cut profit estimates for all but Wells Fargo.


Bank of America, which relies heavily on the trading and mortgage businesses, suffered the biggest drop. Analysts have reduced their third-quarter per-share earnings predictions for the Charlotte, N.C., lender by 27% since July 1.


The tempered expectations are a troubling sign for an industry already struggling to overcome lackluster loan demand, a weak economy and the hangover from the 2008 financial crisis, as regulators and government investigators work through a backlog of cases focused on banks' activities during the housing downturn.

They may not be good with non-taxpayer funded numbers, but bankers are always quick when it comes to turning a phrase:

"For a while we thought a light was at the end of the tunnel," said Gerard Cassidy, a banking analyst with RBC Capital Markets. "It seems to be a Mack truck.

In previous years there was always at least one product group that was making money. This year: everyone is suffering.

Mr. Stein, the recruiter, said he received 100% more calls in August and September than in the same months in 2012 from disgruntled traders in fixed income, currencies and commodities at big banks looking to switch firms. "There's no opportunity to make any money right now," he said. "Nothing is happening."

Naturally, since everyone wants out and to find a job at a competitor, it is suddenly the biggest buyer's market out there. It also means axes will be flying in 2013 coming bonus time, or rather, just before.

Some banks have started looking at contingency plans for future layoffs, Mr. Stein said. "Just when you thought they got rid of all their expensive people, they're going to have to go back and relook at that," he said. "It's been brutal," said Michael Menatian, a mortgage banker in West Hartford, Conn. "We were flat-out busy until May. Once rates went up, things went completely dead." He said he closed around $4 million in loans every month through June, and about $1.5 million a month since then.

And we are not talking selected surgial layoffs here and there. The mortgage industry: that bread and butter of banking Net Interest Margin-based operations, is about to be nuked from orbit.

J.P. Morgan, Bank of America, Wells Fargo and Citigroup already have cut more than 10,000 mortgage jobs this year, with plans for thousands more to come. J.P. Morgan is accelerating plans to cut as many as 15,000 jobs in its mortgage division by the end of 2014. All told, the number of employees in the industry will likely shrink by 25% to 30% over the next year, estimates Christine Clifford, president of Access Mortgage Research & Consulting, Inc., a Columbia, Md., mortgage research and consulting firm.

Finally, since a dropping bonus check tide will reduce all compensation packages across all levels, it means more disgruntled bankers, less discretionary income for the wealthiest, even less taxes paid into city, state and Federal coffers, less consumption and more saving, and an end to America's deficit-cutting miracle and certainly and end to the days of barely even stall speed GDP.

As for what it means for second half S&P500 EPS of which financials represent 20%, and for the hopes and prayers of discredted "the recovery is here" chatterbox pundits (and central bankers) everywhere, we are confident, no pun intended, readers can figure that out on their own.

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Thu, 10/03/2013 - 20:07 | 4020971 Xibalba
Xibalba's picture

In other news, 81million views and counting in 30 days


Thu, 10/03/2013 - 20:11 | 4020984 LetThemEatRand
LetThemEatRand's picture

Come on, man.  That's fine art.  Ding, ding, ding, etc.

Thu, 10/03/2013 - 20:17 | 4020997 Xibalba
Xibalba's picture

based on a true story! 

Thu, 10/03/2013 - 20:35 | 4021057 Harlequin001
Harlequin001's picture

"I haven't seen morale this bad since the Titanic,"

Well he's obviously been around for a long time hasn't he...

Thu, 10/03/2013 - 20:39 | 4021063 Uber Vandal
Uber Vandal's picture

If he said "morale this bad since Little Big Horn", that would be saying much, much more.

Thu, 10/03/2013 - 21:29 | 4021167 john39
john39's picture

what wall street needs is real headhunters...  not the bullshit job brokers...  but the bone in the nose, head shrinking skull collectors... 

Thu, 10/03/2013 - 22:01 | 4021219 Richard Chesler
Richard Chesler's picture

Sheeple won't touch the market with a 10 foot pole. Who're we going to steal from? wah wah wah...

Fri, 10/04/2013 - 06:33 | 4021735 fockewulf190
fockewulf190's picture

The green shoots have already been eaten, shat out, and consumed by flies. When gold and silver are put through the same process though, they still come out nice and shiney.

Fri, 10/04/2013 - 10:27 | 4022328 hedgeless_horseman
hedgeless_horseman's picture



Titanic?  Let me try to boost moral...

Fri, 10/04/2013 - 07:35 | 4021832 kralizec
kralizec's picture

Yup, nothing left but to feed on each other...last cannibal wins?  LOL!  So sad too bad!

Thu, 10/03/2013 - 22:21 | 4021255 mickeyman
mickeyman's picture

He meant the movie

Thu, 10/03/2013 - 20:17 | 4021001 knukles
knukles's picture

If the bankers are so depressed, does this mean suicides galore?

Thu, 10/03/2013 - 20:19 | 4021009 LetThemEatRand
LetThemEatRand's picture

Don't get our hopes up!

Fri, 10/04/2013 - 01:01 | 4021549 ZaphodBeeblebrox
ZaphodBeeblebrox's picture

Sure when the cost cutting leads to them getting pushed out to Obamacare and then the meds are cut. 

Fri, 10/04/2013 - 03:24 | 4021666 zhandax
zhandax's picture

Complete horseshit.  You don't think CNN would have a crew filming manhattan douchebags jumping outta buildings?  "Oh, the Humanity!" 

Call me when you have red on the sidewalk that wasn't caused by cops.

Fri, 10/04/2013 - 01:47 | 4021598 e_goldstein
e_goldstein's picture

They need to unlock the windows on Wall Street first.

Thu, 10/03/2013 - 20:39 | 4021065 slaughterer
slaughterer's picture

What happened with the engineered equity rally avec lying presstitute sweet-talk?  

The only bankers getting in touch with their dark side right now are dummies.  

Fri, 10/04/2013 - 01:54 | 4021350 Freddie
Freddie's picture

The video is racist.  It is filled with attractive, probably fairly intelligent white nordic people who can speak and sing in perfect English.   No lyrics about cop killing, bitches, hoes, mal liquor, .40s or Trayvon.

Fri, 10/04/2013 - 07:32 | 4021827 JB
JB's picture

it makes a pretty good marching band song:



best part is they rehearsed and performed it in less than a week.

Thu, 10/03/2013 - 20:07 | 4020973 lolmao500
lolmao500's picture

Yet most of the stuff is still in the books using mark-to-fantasy accounting... if mark-to-market was forced down their throats, the situation would be much uglier.

Thu, 10/03/2013 - 20:17 | 4020999 TeamDepends
TeamDepends's picture

The beatings will continue yadda yadda yadda....

Thu, 10/03/2013 - 23:20 | 4021376 Freddie
Freddie's picture

Seriously - how many times has Citicorp failed and gone broke to only be saved by taxpayers yet again.  The last time they were paying that criminal Rubin $20+ million a year.

Thu, 10/03/2013 - 20:09 | 4020975 LetThemEatRand
LetThemEatRand's picture

"The revenue collapse, according to CEO Dick Handler, was due to "rising-rate environment."

Presented with no comment, as Tyler says.

Thu, 10/03/2013 - 20:19 | 4020996 akak
akak's picture

"Annual corporate profits are already on the upswing, as sales firm up and consumer confidence continues to stiffen as corporate overhead is cut to the bone", said Marketing Vice-President Hugh G. Rection."

Thu, 10/03/2013 - 20:20 | 4021014 LetThemEatRand
LetThemEatRand's picture

Dick Fuld.

Thu, 10/03/2013 - 20:22 | 4021022 akak
akak's picture

Barb Bush?

Thu, 10/03/2013 - 20:26 | 4021032 LetThemEatRand
LetThemEatRand's picture

Blythe Masters in Silver Slamdown II, Silver Is My Bitch.

Thu, 10/03/2013 - 20:50 | 4021086 TeamDepends
TeamDepends's picture

Behind The Fiat Door, starring Dimon Spear and Masters Blanquefein, will launch this firm into the stratosphere.

Thu, 10/03/2013 - 20:52 | 4021094 NoDebt
NoDebt's picture

National Associaltion of Realtors

Thu, 10/03/2013 - 21:10 | 4021126 LetThemEatRand
LetThemEatRand's picture

Never been a better time to be bi.

Thu, 10/03/2013 - 23:26 | 4021391 Andre
Andre's picture

Any man who get "excited" over Barbara Bush has SERIOUS issues.

Fri, 10/04/2013 - 02:09 | 4021616 Freddie
Freddie's picture

The banksters get free money from the Fed, are allowed to give mortgages to retards who can never pay them off, are given endless TARP money, have "Linda Green" robo sign everything, pay despositors 0.05% on deposits, get to trade with insider trading, they break endless laws, underwrite shitty muni bonds and pay no taxes and they STILL can't make any money? 

WTF?  They need to FAIL.   They could not make money with a bordello restaurant bar that has 5 Navy ships in port every week docked within 100 feet of their establishment.  Retards!

Thu, 10/03/2013 - 20:10 | 4020979 lolmao500
lolmao500's picture

I believe if the government wasn't shut down right now, the Titanic could have been saved. - Nancy Pelosi

Thu, 10/03/2013 - 20:12 | 4020982 williambanzai7
williambanzai7's picture

This is what happens when you don't remove gangrenous tissue. The whole corpose rots.

We have had five years of slow festering and this is the end result.

Congratulations Larry, Tim and Ben.

Unfortunately, what should be cause for schadenfreudian amusement is not, since the whole shit tank puts a drag on a fresh economic start.

Thu, 10/03/2013 - 20:14 | 4020992 NoDebt
NoDebt's picture


Speaking of the Titanic, a quote I've thrown up here more than a few times:  "She is made of iron, sir.  I assure you she can and will sink.  The pumps buy you time only, nothing more."

We've had the pumps going for 5 years, yet the ship of state continues to sink by the bow as it slowly lists to port.


Thu, 10/03/2013 - 20:16 | 4020995 williambanzai7
williambanzai7's picture


Thu, 10/03/2013 - 20:18 | 4021004 NoDebt
NoDebt's picture

I was just about to ask if you could play us some happy music before we slip beneath the waves.  You do not disappoint.

Thu, 10/03/2013 - 20:34 | 4021052 LetThemEatRand
LetThemEatRand's picture

Bankers and politicians first.

Fri, 10/04/2013 - 00:21 | 4021487 imaginalis
imaginalis's picture

They were never trying to fix things. They just delayed the inevitable to steal more and configure a stronger position from which to place a large boot upon the face of humanity. 

Thu, 10/03/2013 - 22:38 | 4021279 luckylogger
luckylogger's picture

Banzia- you hit it right on the nose !!!!!!!!!!!!!! Anytime in history that wa;; street bankers got more than 8% of the GDP- they fuked everything up

Currently that are around 14%

Hang'em high.......................

  1. By the way- FUK U NSA!!!!!!!!!!!!!!!!!!!!
Thu, 10/03/2013 - 20:13 | 4020985 Bangin7GramRocks
Bangin7GramRocks's picture

Hearing about bankers bitching about bad bonuses makes me want to choke a motherfucker! They should ALL be unemployed. The top guys should ALL be in jail. The entire industry exists because the federal government and the Federal Reserve allows it to remain solvent. The fucking balls on these ungrateful bastards!

Thu, 10/03/2013 - 20:40 | 4021069 Anusocracy
Anusocracy's picture

Don't the Alphas alway deserve more?

And it's even sweeter when most others are suffering.

Thu, 10/03/2013 - 22:24 | 4021258 NidStyles
NidStyles's picture

Alphas do not need self-gratification, nor do they seek paper IOU notes to qualify their existence. All of those assholes are nothing more than arrogant betas that think they are in positions of power and authority. If they had any real power or authority they would not need the clever tricks/games/deceptions to keep this joke going. They would simply be able to lead people through the whole crisis and come out ahead.

Thu, 10/03/2013 - 20:14 | 4020991 nmewn
nmewn's picture

Since the Titanic?

Zombie Headhunters of Wall Street?...run with it Banzai...lol.

Thu, 10/03/2013 - 20:18 | 4021005 pauhana
pauhana's picture

Where can I sign up to be a Wall Street headhunter?  Yummy!

Thu, 10/03/2013 - 20:18 | 4021011 thelibcentury
thelibcentury's picture

I wrote in a previous thread that the majority of the legislature is likely compromised by the banking/mic leviathan.

So if we can posit that everything that occurs through the gov't occurs because that group deemed it should, then whatever happens next happens by their say so.

What do we know about the current realities weighing on their shoulders? The red vs blue kabuki theater is plenty entrenched in the culture at this point, it's the most sellable explanation for "surprising" drastic paradigm shift and asymptotic drop in living standards.

That's incidentally why I suspect it could quickly lead to irreversible fascism.

Thu, 10/03/2013 - 20:31 | 4021041 NOTaREALmerican
NOTaREALmerican's picture

Re:  That's incidentally why I suspect it could quickly lead to irreversible fascism.

Depending on how you define "fascism" we've probably been there for a few decades.

We lost WW2 to the fascists when we never disbanded Big-MIC, the father of all crony-capitalist scams.  

Thu, 10/03/2013 - 21:12 | 4021133 thelibcentury
thelibcentury's picture

Agreed. I guess I meant like mega, fuck-you-in-the-ass fascism.

Thu, 10/03/2013 - 20:21 | 4021017 acetinker
acetinker's picture

Jeebus!  This fellow Stein really is a senior recruiter.  Titanic sunk 101 years ago!

Thu, 10/03/2013 - 20:24 | 4021025 williambanzai7
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