Bank of America this morning announced that it will fire 2,000 investment bankers on top of the 30,000 announced last year in an attempt to regain profitability.
This looked like another run-of-the-mill megabank layoff announcement except that along with the layoffs, the bank also is planning on a structural overhaul of how junior bankers (analysts and associates) are going to be staffed at the firm.
Specifically, the Wall Street Journal reports:
One structural shift being planned will pool junior investment-banking employees across different industry sectors so the younger bankers can be routed to whatever area is most in demand at that moment, said people familiar with the situation. Proponents say that move will help younger workers gain more experience, while others say it will detract from the bank's service to clients.
What does this mean for junior bankers?
It is still not clear how or when this will happen, but it may signal a massive change in the experience of an investment banking analyst or associate. Currently, junior bankers are assigned to an industry group (i.e. consumer, telecom, healthcare, FIG, energy) or a product group (M&A, levfin) for the entire two-year program. This change appears to contemplate having junior staff rotate around into multiple groups throughout the two years.
Why this could be really good (for those who don't get fired)
Depending on how this plan is executed, in my opinion this could represent a massive upgrade to the experience of an analyst or associate, who currently gets silo-ed into a group immediately after (or even prior to) training in a way that often results in a limited understanding of corporate finance.
For example, a FIG analyst typically has a very limited understanding of working capital or enterprise-level valuation methods, an M&A banker typically has a very limited understanding of debt or equity offerings, while a tech banker will have never had to think about how capital leases or fixed assets play a role in financial or valuation analysis. These are major knowledge gaps for a finance professional.
Bank of America isn't doing this because they want to improve the professional development of junior staff; the bank's new approach is borne out of necessity to do more with less. Nonetheless, the unintended consequence may very well be a more well-rounded junior banker. It should be noted that while this plan is novel for banking, it is the standard quo in medicine, where a rotational approach is used at residency programs prior to allowing physicians to specialize via fellowships.
Opponents will argue that junior staff will miss out on an opportunity to gain a deep understanding of one industry and forge close relationships with senior bankers. That risk is definitely there, but much of the can be mitigated via thoughtful execution of the new rotational structure. For example, rotations through a group should last for at least three months. More structured mentorship with senior bankers could also help.
On a day when a major bank announces a fresh round of layoffs there is usually little to celebrate. However, for those that weathered the storm at BofA and new incoming analysts and associates, the new structure could represent a great opportunity.
OP (or anyone else), and word on how this will affect people in capital markets like DCM who are technically in the investment bank? They wouldn't transfer you from DCM to pure banking and what not, would they?
Is there any word on whether junior bankers will be rotated from product to industry groups, and vice-versa, or solely from one industry group to another? As in, will M&A and LevFin join the pool?
This article makes it sound like everyone will be rotatable, but an earlier post on this topic made it sound like just an industry group thing.
Moynihan really seems to hate the shit out of Merrill Lynch. This is another move to kill more value that they picked up from Merrill. You could retort "well, it's just analysts," but think this move could hurt the more esoteric groups where industry understanding trumps generic m&a skill-sets.
My guess is that it wont be long now before BofA absolves the Merrill Lynch prefix.
You mean suffix.
It's neither.
^ it wasn't me, I swear!
Correction: WILL hurt the more esoteric groups. M&A is very cut and dry modelling work, but a valuations/industry group is going to get seriously fucked. There are a lot of potential upsides, but it really seems like they're wasting their time reinventing the wheel instead of focusing on what actually matters: generating business.ML name to take over and management shuffle within a year.
2,000 people from IB, CB, and wealth management, globally, is not exactly a significant number.
But yes, I don't think any of this is too terrible for incoming guys. As a friend of mine put it regarding another bank with layoffs, "it's a chance to dominate or get dominated".
...doesn't this basically mean that analysts will have less downtime (if any) to recover from the stretches of all-nighters that they pull during live deals?
It's really unfortunate that ML had to get shotgun married to BofA because they are actually doing well. #2 in Q1 for Deal Fees, leader in fees for Healthcare, Real Estate, Media/Entertainment, and Consumer Products.
Wouldn't rotations require Analysts and Associates to get significantly more training? Seems like a sink or swim environment will be developing.
I Disagree. 3 month experience is not enough to fully understand an industry or a product. The way I see it, the point of being an IB analyst is precisely to become an expert on something. Maybe you don't require 2 years, but I'm sure at least 9 months are required. If this was like a rotation program where you spent 1 year in M&A and 1 year in FIG it would be good, but what they're doing is assigning analysts based on project needs. So you might end up not only spending little time in each group, but working on 2 groups at once. Not to mention the fact that this will probably be horrible for BoA analyst's exist opps, which is why many people go into IBD in the first place. Oh, and residency is 5 years not two. And everything is much more related and you actually need to know the basics from all specialties. Not to mention that you specialize before fellowships.
Credit Suisse is already doing this, multiple banks have done it historically. It tends to result in very little change in practical terms and ultimately be abandoned. Smart/good analysts/associates will work with the same MD over and over, who will request them and tell the staffer to f- off. Building a broad knowledge base is great until a FIG guy fucks up an LBO and the client is the first to notice
It includes Associates and VPs as well
Credit Suisse is already doing this? Anyone else know which other BBs have this structure for analysts?
At least in Europe, not sure about the US
From anybody who knows more than what the article says... Is it actually going to be a rotation, or more like when you are free they just staff you on whatever the next thing is regardless of industry/product?
I hope BofA isn't going to be the next UBS.
This is not an accident. Many of us go into M&A specifically so that we don't ever have to get staffed on a securities offering. Dilution in the quality of one's experience should not be sold as a universal benefit.
Agreed. I would rather be a master of something than jack of all trades and a master of nothing. Doing well on interviews depended on that as well.
So what do junior bankers that are in non-NYC offices do? I can't exactly see a San Fran banker switch from tech to energy without having to move to Houston (or to a lesser extent, NYC) or vice versa.
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