Bankers’ beach vacation threatened by market turmoil

Bankers are bracing for a hiatus in summer holiday plans to offset a lackluster start to 2022 in capital markets as they hope business will pick up in the second half.

Markets were rocked by the war in Ukraine, the impact of China’s zero Covid policy on the global economy, the threat of a global recession and stalled supply chains in 2022.

Difficult economic conditions led to a 30% drop in European corporate borrowing in 2022 compared to the first half of 2021, while there was a precipitous drop in IPOs and secondary equity issues, down by more than 90 and 70 percent. cent respectively, according to data from the London Stock Exchange Group.

Due to cooler trading conditions, UBS expects a higher than usual workload over the summer months to prepare for more debt issuances. “We’re going to have to work through the summer,” said Barry Donlon, head of Emea bond capital markets at UBS.

“Banks have not fallen behind on their issuance plans despite the slowdown, but market windows have been less frequent and shorter due to volatility, so banks will issue when the markets are there” , did he declare.

“The traditional idea of ​​a quiet August will not happen this year.”

It will follow a “very unusual” period of moderate activity, Donlon said. Tough conditions mean bankers could spend more time at the counters this summer as they seek to take advantage of quiet periods to issue debt.

A senior banker at another European lender added: “If there is work to be done, there will be people to do it, no doubt. We will serve our customers throughout the year, whether it is August or December.

“Whether [clients are ready to issue] I will be there; we are all more flexible in terms of where and how we work.

Liquidity is at its worst in markets since the early days of the coronavirus pandemic in 2020, US investors and banks told the Financial Times this month.

Guy Stear, head of fixed income research at French bank Societe Generale, said there was pent-up demand from issuers to sell bonds.

“We could well see a busier than normal August, assuming the market stabilizes by then,” he said, but added: “The real issue is whether the market bearish has run its course by then, and I’m afraid it’s unlikely to have done so.

Working through the summer would cap off a difficult few months and prolong the upheaval in working conditions caused by the pandemic, according to Alison Harding-Jones, head of M&A Emea at Citigroup, who said bankers were “exhausted” and “looking forward to a long – late holiday”.

“If things happen over the summer, we will always be flexible and make sure things get done,” she said. “But it’s been an incredibly difficult few months, after a grueling 2021 and Covid.”

Citi is setting up an investment banking center in Malaga for junior staff which, in the coming years, could help ease some of the summer workload. But it won’t open until later this summer, so it won’t be ready to help more experienced bankers come August.

Julio V. Miller