Now, however, while investment banking headcount is being pared back, transaction banking is quietly booming.
Transaction banking encompasses various commercial banking services for corporate clients and financial institutions, including trade finance, export finance, cash management, corporate treasury sales and securities services. Generally, it’s considered a “core” function of banking, which means – in modern-day employment terms – relatively dull.
“The age dynamics of transaction banking are significantly skewed to the older, more senior individual,” says Paul Hunt, managing director of recruiters Healy Hunt. “There’s a real dearth of talent at the junior and mid-level, because over the past 10 years graduates have favoured more attractive and possibly more remunerative roles in investment banking.”
This is starting to change, however. While the conversation around investment banking centres around whether the current headcount reductions are cyclical or the start of a fundamental shrinkage of the industry, banks are building out their transaction banking functions.
We’re told that Citi, Lloyds Banking Group, Royal Bank of Scotland and J P Morgan are all currently hiring in this area. Deutsche Bank revealed in its Q4 report presentation that it was integrating its investment bank with its global transaction services (GTS) division. It is “well-positioned” when it comes to headcount in GTS, it added.
“Global banks are dealing with various external stresses – whether that’s capital requirements, increased regulatory scrutiny or their exposure to the eurozone. They’re looking at their business models and focusing more on core functions. Transaction banking is benefitting from this after many years of under investment,” adds Hunt.
And while bankers currently are generally being vilified for bonus payments by the public, the compensation on offer in the transaction banking space looks, well, fairly responsible.
The highest bonuses are for those working in structured trade and commodity finance with 10-15 years experience, and they average around 60 per cent of base salaries, according to a salary survey by Global Trade Review. Generally, they tend to hover between 20-40 per cent of base salary, however.
Salaries also trail behind sectors such as investment banking, fund management or private equity. The median range for those with 3-5 years experience is £50-60k in the UK, rising to £70-80k after 5-10 years experience, £85-95k after 10-15 years and £110-120k for anything over that.
Slowly, transaction banking is being viewed as an attractive career path by financial services professionals in other sectors, suggests Stuart Rogers, associate director at recruiters Hudson’s banking and financial services division.
“We are finding that financial services professionals from retail, corporate, commercial and payments and card processors are being considered for these roles,” he says. “This is generally due to the fact that this mirrors the diverse customer base of the transactional banking business.”
This article by Paul Clarke is reproduced by kind permission of eFinancialCareers