It seems to have taken a year of contradictions for many firms to really start to get their acts together. We may well look back on 2004 and realise that it proved to be a catalyst for change which shaped the future of the industry.
The year started out full of promise, with firms hiring like crazy to ensure that they were well positioned to receive their share of the spoils. But, with some notable exceptions (and perhaps most notably Barclays Capital and Goldman Sachs), the wheels came off after May and firms started a mad scramble for revenues. The realization then dawned for many that the old ways were gone forever. Except for the very few, it is no use firms trying to compete in all products in all markets. For once, the industry started to look inward - and many firms didn't like what they saw. The result was often a restructure following a review.
After years of big staff bonuses and, some would say, a rather bloated payroll, Deutsche Bank realised that it was time to return bigger profits for shareholders. A huge restructuring programe is in progress, which will involve the German bank's retail, wholesale and wealth management operations. Thousands of jobs will go as a result.
Over at CSFB, the results were less drastic. But the firm finally came to terms with the fact that it was no longer sensible to try to be all things to all men. Both DrKW and JP Morgan let staff go at the end of the year as they plan to shift resources into more stategically important areas. And Commerzbank finally all but gave up the investment banking ghost as it axed offices in Tokyo and New York and bankers in London. The wagons are now circling around Frankfurt. Many are not sure what to make yet of ABN Amro's recently announced restructuring programme.
After three relatively lean years, firms thought the gravy train had returned to the station as 2004 kicked off. They soon realised, however, that there is no longer a gravy train at all and firms are having to adapt to a new reality. There will be more reviews and restructures ahead as the industry reduces its capacity to meet client demand. The future will see very few truly global integrated investment banking players. Firms will be more strategic in the way they operate and will no longer simply chase business for the sake of it.
At least that's what some CEOs would have you believe. But since when have investment banks really had any kind of strategic vision ? Some feel that it will only take a few good months of solid revenues and the gloves will come off again. And then there will be more reviews and being all things to all men will again become the next best thing!