There are signs of growth in Australian capital markets, but this isn’t leading to new vacancies as cash-strapped i-banks look to redeploy rather than recruit.

The top-10 investment banks in Australia earned $521.1m in Q1 this year, a 16.6% increase from Q1 2008, according to Thomson Reuters figures. And during the past year ECM and DCM work has replaced M&A advice as their main income source.

Debt market revenue in January to March 2009 was more than double the level earned for all of 2008. Equity has also been buoyant, with a number of companies carrying out raisings, particularly in the past few weeks, to take advantage of stronger global markets.

But this fresh activity in the markets is not spilling over into recruitment. “We aren't seeing much hiring from the full-service investment banks and several have headcount freezes,” says Angus Price, a partner at Derwent Executive.

Investment banking in Australia is dominated by foreign firms and their US or European headquarters are taking a hard line on hiring. “Even replacement roles are rigorously assessed before a firm will recruit externally,” says Tim Beach, a front-office recruiter at Robert Walters.

UBS, for example, may have maintained its number one position in Australian i-banking, but globally it made US$1.75bn loss for the first quarter and is planning to slash another 7,500 jobs worldwide.

“ECM and DCM teams are busy. They would like to have more people on the execution side, but they can’t push it through. They are under pressure to source internally, especially if M&A teams are letting people go,” says Beach.

Price adds: “Even with an increase in capital markets activity and the emergence of some new restructuring divisions, most investment banks are redeploying candidates from other areas that aren't as busy.”

Redeployment might, for example, mean credit analysts moving to insolvency roles, or M&A professionals shifting to capital markets.

But if they haven’t started recruiting yet, have the global i-banks at least finished most of their retrenchment in Australia? “It's too early to call if headcounts have now stabilised but we anticipate that we are now close to the end of the retrenchment cycle within banking and if there are further rounds we don't anticipate they will be as deep,” says Price.