I-Banking: Now Just as Crappy as Other Jobs?
By BankersBall on Sep 24, 2008 in Cube Life, Layoffs, Lifestyle
Bridging the pay gap between commercial and investment banks. Regardless of whether the Merrill Lynch Bank of America tie-up happens (there are reports that shareholders may not go through with it), the world of investment banking as we knew it is over.
Let’s all take a moment and dribble a little double espresso out on your closest deal toy.
So moving on … what does that mean for bonuses? As we know, the world of commercial bank bonuses is a grim one. Just look at 2006, when bonuses for the “investment banks” (how quaint) increased by 25% vs 5% for the commercial guys.
Ditto for the guys on top. Investment bank CEOs like Blankfein and Mack have historically made 2-3x commercial bank CEOs. And that translates into the rank and file, as well. (Citi average comp / IB employee = $100,000 vs. Goldman = $400,000 — $600,000 in 2006).
And of course, this year, if you have a job, you’ll probably count your lucky stars. Except that’s not really the way bankers think. So here’s one forecast: an anon Goldman Sachs insider is predicting that bonuses for this year will be more than 25% smaller than the year before.
But the bigger question is will investment banking still be worth it, or will it be pretty much like any other above-average pay, but crappy job? (Is that the sound of corporate lawyers cheering?)
On Sep 25, 2008, Jeff said:
nows the chance for the MM independent investment banks to rise up.
lazard, houlihan, greenhill, evercore, jefferies
On Sep 25, 2008, Nick said:
Your writing is all over the place.
On Sep 25, 2008, Believer said:
be not afraid
On Sep 26, 2008, Me said:
Investment banking will never be as crappy as other jobs, it’s still the standard bearer for the elite.
On Sep 26, 2008, Alex said:
Agreed, mid-market and boutique investment banks are gonna rise and be the place to work in the next decade for pure dealmaking.
On Oct 3, 2008, Joe said:
I just saw a site called xwallstreeters dot com. Even with these mid-market and boutique banks IB will not be the same as it was with the big players. In fact these banks have seen what went down and they will just be even more cautious. As a career option though I think IB has fallen from its high horse and we just have to rethink our alternatives ahead.
On Oct 6, 2008, Anonymous said:
Yes, the corporate lawyers are cheering.
On Oct 8, 2008, sred said:
In the long term, the market is efficient. The market is adjusting right now and compensation for I-bankers will decrease drastically.
On Oct 8, 2008, Straight Shooter said:
Pour one out for the Bankers…Swinging Big Dicks unite…We will have to overcome and adjust…As Liar’s Poker and history has showed us, our economy is cyclical. This is the end of a long lasting wonderful era.
Enough said, you will all have to man-up and figure it out…Hopefully you have some value and worth…Plus, we all know this sh*t is a contact sport…Get to hitting your contacts!!!
On Oct 13, 2008, Former Wanker said:
I’m sorry to burst the bubble for those folks who 1) Thought investment banking was the sexiest thing to do 2) That it will rise back to its 1980’s prestige.
There three factors pre-2008 that have contributed significantly the dethroning Investment Banking.
1)Tech
With the rise of companies like MSFT & SUNW and the multi-million dollar IPO’s of tech companies in the late 90’s a large potion of the most ambitious and most intelligent kids were going into college (and dropping out) to study CS/Applied Math. The Tech industry drew in not only some of the most creative but also some of most aggressive young minds of that generation. Investment Banking had seen a serious drop in recent college grads from top schools knocking on their doors.
2) Private Equity / Hedge Funds
Traditionally Investment Banks were the gate keepers to/of capital. They were used as a vehicle by corporations/governments/municipalities to access public/private funds via markets and their institutional relationships. Over the last 20 years PE/HF have become the new gate keepers of capital that not only act as agents, but also as principal co-investors. Their large returns increased demand for and compensation of junior to mid-level PE/HF professionals who used the IB’s much in the same way that IB’s use Consulting/Law/Accounting firms. IB’s and IBankers were displaced on the totem pole by a more intelligent, more aggressive, and more creative force.
3) Repeal of Glass-Steagall
The repeal of Glass-Steagall created the universal banking model that seems to be the one left standing today. The traditional IBanks (i.e. GS, MS, ML, LB, Bear, SSB, etc..) were faced with greater competition. These hybrid banks could lend more and at less to win the lucrative advisory business away from the incumbents. In the process, it created a commoditized service where personal relationship and brand name were no longer important as before. In addition, the competition drove down fee’s and bonuses.
Ibanking is a joke! I spent 3 years at Merrill Lynch IBK and 1 year in PE.
The people suck, the work after your first year sucks. The smartest leave within 1-2 years, and dumbest/laziest get fired. You are left with mediocrity across all levels.
Mid-Market banks will do well, but I advise them not to fall in the same trap of vomit-culture that the other fell into. Its too late for Lazard in regards to this.
IBanks are going through the loos of prestige that the big corporation went through in the 80’s.
My opinion is that if you are dead set on doing it don’t stay in it for no more than 1 year.
goodbye and good riddance. They never deserved the cache they had. And the times have changed, thankfully.