If markets head swiftly south, analysts say banking jobs will be a lot more secure than they were in 2001 and 2002.
Why? Although costs have risen, it seems banks have resisted the urge to splurge on staff spending, leaving them with less fat to trim should things get nasty.
"In recent years each bank has reduced its cost ratios substantially because revenues have been so strong," says Dick Bove, an analyst at Punk Ziegel & Co. in the US. "Cost ratios [at US brokerages] are now all extremely low."
European banks have been equally frugal. "Revenues are close to all-time highs, but compensation ratios have stayed reasonably low," says Vasco Moreno, head of European banks research at Keefe Bruyette & Woods. "Last time, banks were in much worse shape at this point of the cycle - they were using two or three-year guarantees, which can lead to significant pain in the P&L when revenues fall."
The hard data
Still not certain? Banks' results should give cause to be sanguine.
Compensation as a proportion of revenues fell to 48% at Goldman Sachs in the first quarter of this year, for example, down from 50% in the first quarter of 2006. Net revenues at Barclays Capital rose 42% last year, while costs rose 35%. Revenues at Calyon rose 32%, while costs rose 18%. At Dresdner Kleinwort revenues increased by 19%, costs by 12%. And at Credit Suisse revenues rose 32% while costs crept up a teeny 4%.
If anywhere looks overstretched, it may well be UBS, which saw its fourth-quarter investment banking expenses rise 32% compared to a 22% increase in operating income.