How BofA's layoffs could be unintentionally good for analysts and associatesIB
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, ) 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 .
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.