Europe’s Investment Banks Gear Up for 2026: Strategic Hiring & AI to Drive Deal Recovery

The headline article from Financial News London reveals a cautious stance among European investment banking leadership despite market signals pointing to a potential boom in 2026 dealmaking. Key firms like Morgan Stanley, JPMorgan, UBS, Deutsche Bank, RBC, BNP Paribas, and Mizuho are setting modest but targeted hiring plans, mainly at the senior level, emphasizing internal promotions and sector-specific hires over broad-scale headcount expansion. [1]

On the demand side, deal volumes are expected to recover in Europe next year, buoyed by strong trends in IPOs, private equity, and ECM backlog. However, the lift is coming off a base of underperforming fee pools: European IB revenues in 2025 are only up ~2%, versus ~15% globally. That discrepancy imparts caution. Firms want to ensure returns before making major investments in talent. [1][2]

Simultaneously, artificial intelligence is reshaping the cost structure and strategic outlook for banks. AI-driven efficiencies are anticipated to boost valuations and margin profiles, and many banks are using technology to reduce routine labor, especially in back-/middle-office functions. These trends potentially lessen the urgency for large hiring, especially for roles expected to diminish or shift in nature. [2]

Adding to this, macro risks persist. Geopolitical instability, regulatory pressures (valuation of risk, taxes, compliance), elevated interest rates, and potential economic slowdowns all weigh on decision-making. Banks are mindful of not overextending themselves amid uncertain policy regimes and potential shocks. [2][3]

Strategically, this environment suggests that leading firms will compete aggressively for high-impact, senior talent—those who can bring client relationships, deep sector expertise, or capabilities aligned with growth areas (e.g. healthcare, tech, energy transition). Leaders are likely to favour a leaner, more elite bench over a broad pyramid of junior hires. Internal talent development will also play a key role. Firms located or operating across major European markets—UK, Germany, Nordics, France—will be in sharper competition for top-tier dealmakers. [1]

Open questions remain: how will cost pressures tied to AI affect junior banker roles? Will regulatory burdens (capital, ESG, cross-border operations) constrain or redirect growth in certain geographies? What will compensation demands from senior hires look like amidst competition—and how will banks manage internal equity and retention? Finally, how robust is the expected deal volume bounce—and what could derail it (e.g. recession, policy shifts, credit tightening)?