Profits are hard to come by, business levels have been halved, but banks are still pottering about on the periphery when it comes to redundancies.

The numbers speak for themselves. An additional 2,900 people to go at Merrill Lynch? That’s just 10% of the total. And what are another 9,000 job cuts at Citigroup when the investment bank employs 369,000 people worldwide?

People who’ve retained their jobs have bonuses to thank. At the average US investment bank, compensation accounts for two thirds of total costs, and 60% of compensation is typically in the form of bonuses.

Bonuses can be slashed to zero if necessary, enabling banks to eliminate 40% of all costs simply by forcing their bankers to live on salaries alone.

However, even if bonuses are reduced to nothing, the headcount cuts implemented so far will not be sufficient to offset the collapse in revenues.

At Merrill Lynch, for example, revenues were down 69% in the first quarter of the year versus the same quarter of 2007.

As much as 27% of that fall can be mitigated simply by slashing bonuses to the bone. But Merrill still needs to cut costs by another 42% if it’s to match the fall in revenues – and given staff costs account for two thirds of total costs that implies a reduction in salaries (and, all things equal, headcount) of around 28%.

Why aren’t banks grasping the nettle? One answer is that they’re in the grip of a kind of Pavlovian conditioning learnt in the downturns of 1998 and 2001 – Merrill Lynch, in particular, cut staff zealously, only to have to hire them all back at higher prices when markets improved. And who wants to do that?

With this in mind, and with banks' CEOs publicly confident that we’re over the worst, the emphasis is still on preservation rather than decimation. Jamie Dimon said last week that JPMorgan has imposed a freeze on hiring in New York as it tries to re-house as many displaced Bear Stearns bankers as possible – rather than leaving them to freeze on the street.

Citigroup is going one step further and actively seeking new staff, albeit less enthusiastically than last year – headcount growth is currently running at 8%, down from 12% in 2007.

There were some high points to last week’s results – rates and currencies did universally well. However, what was also notable was that a crunch that began in structured credit has now impacted the equity capital markets and M&A advisory businesses that it was once hoped would remain immune.

Unless things change soon, we’re in for a lot more job cuts to come.