A few weeks ago, investment banks Oppenheimer Holdings and Evercore Partners decided to slash a number of research analysts from their staffs in response to declining equity commission and underwriting revenues.
Bad News at Oppenheimer
A spokesperson for New York investment bank Oppenheimer Holdings recently announced that seven senior equity research analysts and seven research department support staff would be laid off as a result of its annual year-end review.
A few of the senior research analyst cuts included Robert Duboff (Oil & Gas), Holden Lewis (Emerging Technologies), Sean McGowan (Consumer Leisure/Lifestyle Brands), and James Schumm (Oil & Gas). Management noted that the firm would refocus its energy coverage on clean technologies.
The layoffs at Oppenheimer are probably due to recent weakness in equity revenues as 4th Qtr 2015 equities commissions dropped 2.9% to $30.4 mln, and underwriting fees plunged 38% to $5.1 mln from the same period in 2014.
Evercore Trims Staff
Boutique investment bank, Evercore Partners, also recently cut five equities analysts from its research team, including both senior and junior level staff. While the names of most of the analysts are unknown, one senior analyst who was let go is Chris Allen, a Managing Director who covered capital markets for the firm.
Evercore made these cuts despite the fact that it had recently reported strong 4th Qtr financial results. The firm reported 2015 4Q revenue of $408 million, a 27% increase from the same quarter in 2014. The earnings-per-share (EPS) for the 4th Qtr was $1.22, exceeding expectations of $1.05. Evercore’s investment banking unit also posted strong results, reporting $378 million in net revenue for 4Q, up 29% year-over-year.
Clearly, the prolonged weakness in the global stock market (particularly in the energy sector) and the drying up of initial public offering activity is having a negative effect on investment banks’ equity revenue. This is prompting some firms, like Oppenheimer and Evercore, to trim their equity research groups. The big question is whether these difficult market conditions will lead other banks to undertake similar efforts to downsize their research departments. We will have to wait and see if other firms follow suit.