Is Public Finance Investment Banking a Good Career?

I just got an PF internship during the school year in a MM bank (Baird, Raymond James, Piper) and public finance seems really cool to me. I think I would be fine in the field long term, although the thought of slim exits is intimidating.

Should I not be concerned about the hopefully just fluctuating state of the municipal market? Also, does anyone know hours/pay for analyst and MD for a MM bank like the above?

Demand for Public Finance Investment Bankers

Our users shared that public finance bankers will always be needed if municipalities need debt to fund infrastructure investments. Since the nation is in an infrastructure crisis, this should be a secure division to work for in the foreseeable future.

kinginthenorth - Investment Banking Analyst:
There will always be a need for municipalities and other public entities to raise debt and have access to the capital markets, so the chances of it disappearing are essentially non-existent. At the worst, I think there might be some consolidation in the industry.

The margins on muni debt have always been small and will continue to get slightly smaller, but you'll reach a certain point where they can't get much lower than they are. There has to be some incentive for banks to underwrite muni bonds. I remember reading an article that the U.S.'s public infrastructure needs roughly $4-5 trillion in order to be updated/repaired/constructed within the next few decades, so if anything that should serve as evidence the industry will stick around.

User @Cruncharoo", a public finance investment banking associate, shared that while the work is steady, profits will likely be slimmer moving forward.

Cruncharoo – Public Finance Investment Banking Associate:
Slimmer profits are most likely here to stay. Underwriter spreads are significantly compressed and I don't see that changing. Unless the risk profile of underwriting municipal debt changes in a major way they will stay where they are at now. There may be a small spike in fees (both FA and underwriter) under the guise of the new regulations that are in place/coming into place shortly.

Check out the picture below to see the structure and process of public banking.


Source: Attached PDF

Salary for Public Finance

User @kinginthenorth", an investment banking analyst, shared that public banking generally pays less than traditional banking.

kinginthenorth - Investment Banking Analyst:
In terms of compensation, it's definitely lower than traditional banking, but not by much. I can't comment on MM banks, but at larger banks, the salary started off at either $65 or $70k, it's just that bonuses were lower. If I had to guess, I would imagine it's between 80-110k starting between bottom and top bucket analysts, but hopefully somebody else can comment on this. At the director level, salaries are variant, and bonuses too, but a director/MD can pull in anywhere from $600k-1MM+ annually depending on deal flow and their ability to win businesses.

User @Cruncharoo", a public finance investment banking associate, shared that large paychecks won't come until later in a public bankers career.

Cruncharoo” – Public Finance Investment Banking Associate:
For you to be making 600k-1m+ as salary you will have to be at the Director/Executive Director level with a stable of large/regular issuers (major Cities/utilities that issue $1b+ in debt yearly). I wouldn't expect someone to be at that point in the first 15-20 years of their career.

Exit Opportunities for Public Finance

User @kinginthenorth", an investment banking analyst, shared that there are exit opportunities for public bankers but that they are very specific to the industry and focus on infrastructure funds.

kinginthenorth - Investment Banking Analyst:
Slim exits isn't entirely true, it's just that the exits that exist for analysts and associate are vastly different and not as "glamorous" as some of the exits enjoyed by traditional corporate advisory investment bankers. Depending upon which group and which bank you work for, there are options to move to infrastructure funds. For example, if you're in the P3 group at a large bank (like BAML or JPM), I wouldn't be surprised if you could move over to an infrastructure fund. I know Macquarie is well-respected in the space, and their infrastructure fund is pretty active. I've even seen people exit to energy funds, though this is much rarer and significantly more difficult. This would be more typical at the analyst or associate level, if I had to guess, though I don't have direct experience with it.

Towards the higher levels (Director+), I've seen people exit to become high-ups in construction, telecom (like GTE and stuff, not what you're thinking) and utilities companies (both public and private).

At the very top (senior MDs, SVPs), I've seen exits into public service and other types of jobs.

You can learn more about public finance investment banking in the attached PDF provided by Raymond James.

Read More about Public Finance on WSO

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Public Finance Investment Banking Raymond James 1.67 MB 1.67 MB
 
Best Response

There will always be a need for municipalities and other public entities to raise debt and have access to the capital markets, so the chances of it disappearing are essentially non-existent. At the worst, I think there might be some consolidation in the industry, and I know at least on the west coast, there are rumors of Barclays shedding some of its PF businesses though I can't really comment on the validity of it.

The margins on muni debt have always been small and will continue to get slightly smaller, but you'll reach a certain point where they can't get much lower than they are. There has to be some incentive for banks to underwrite muni bonds. I remember reading an article that the U.S.'s public infrastructure needs roughly $4-5 trillion in order to be updated/repaired/constructed within the next few decades, so if anything that should serve as evidence the industry will stick around.

Slim exits isn't entirely true, it's just that the exits that exist for analysts and associate are vastly different and not as "glamorous" as some of the exits enjoyed by traditional corporate advisory investment bankers. Depending upon which group and which bank you work for, there are options to move to infrastructure funds. For example, if you're in the P3 group at a large bank (like BAML or JPM), I wouldn't be surprised if you could move over to an infrastructure fund. I know Macquarie is well-respected in the space, and their infrastructure fund is pretty active. I've even seen people exit to energy funds, though this is much rarer and significantly more difficult. This would be more typical at the analyst or associate level, if I had to guess, though I don't have direct experience with it.

Towards the higher levels (Director+), I've seen people exit to become high-ups in construction, telecom (like GTE and stuff, not what you're thinking) and utilities companies (both public and private), though I think most people aren't necessarily looking to exit the industry. At the very top (senior MDs, SVPs), I've seen exits into public service and other types of jobs. For instance, the former CFO of the UC system was a former MD with Barclays and Lehman in public finance before he left to go work there. He took a significant pay cut, but I'm pretty sure he was making 400-500k a year as CFO for the UCs.

In terms of compensation, it's definitely lower than traditional banking, but not by much. I can't comment on MM banks, but at larger banks, the salary started off at either $65 or $70k, it's just that bonuses were lower. If I had to guess, I would imagine it's between 80-110k starting between bottom and top bucket analysts, but hopefully somebody else can comment on this. At the director level, salaries are variant, and bonuses too, but a director/MD can pull in anywhere from $600k-1MM+ annually depending on deal flow and their ability to win businesses.

"You rarely have time for everything you want in this life, so you need to make choices. And hopefully your choices can come from a deep sense of who you are." - Mister Rogers
 
kinginthenorth:

There will always be a need for municipalities and other public entities to raise debt and have access to the capital markets, so the chances of it disappearing are essentially non-existent. At the worst, I think there might be some consolidation in the industry, and I know at least on the west coast, there are rumors of Barclays shedding some of its PF businesses though I can't really comment on the validity of it.

The margins on muni debt have always been small and will continue to get slightly smaller, but you'll reach a certain point where they can't get much lower than they are. There has to be some incentive for banks to underwrite muni bonds. I remember reading an article that the U.S.'s public infrastructure needs roughly $4-5 trillion in order to be updated/repaired/constructed within the next few decades, so if anything that should serve as evidence the industry will stick around.

Slim exits isn't entirely true, it's just that the exits that exist for analysts and associate are vastly different and not as "glamorous" as some of the exits enjoyed by traditional corporate advisory investment bankers. Depending upon which group and which bank you work for, there are options to move to infrastructure funds. For example, if you're in the P3 group at a large bank (like BAML or JPM), I wouldn't be surprised if you could move over to an infrastructure fund. I know Macquarie is well-respected in the space, and their infrastructure fund is pretty active. I've even seen people exit to energy funds, though this is much rarer and significantly more difficult. This would be more typical at the analyst or associate level, if I had to guess, though I don't have direct experience with it.

Towards the higher levels (Director+), I've seen people exit to become high-ups in construction, telecom (like GTE and stuff, not what you're thinking) and utilities companies (both public and private), though I think most people aren't necessarily looking to exit the industry. At the very top (senior MDs, SVPs), I've seen exits into public service and other types of jobs. For instance, the former CFO of the UC system was a former MD with Barclays and Lehman in public finance before he left to go work there. He took a significant pay cut, but I'm pretty sure he was making 400-500k a year as CFO for the UCs.

In terms of compensation, it's definitely lower than traditional banking, but not by much. I can't comment on MM banks, but at larger banks, the salary started off at either $65 or $70k, it's just that bonuses were lower. If I had to guess, I would imagine it's between 80-110k starting between bottom and top bucket analysts, but hopefully somebody else can comment on this. At the director level, salaries are variant, and bonuses too, but a director/MD can pull in anywhere from $600k-1MM+ annually depending on deal flow and their ability to win businesses.

Muni trader here. Everything above is accurate.

 

Awesome, thanks for the info. For some reason I remember a friend telling me his starting salary was $65k, but this was in Charlotte. At my bank, the 1st year analysts were paid $70k in a non-NYC finance city (SF/LA/Chicago/Dallas)

"You rarely have time for everything you want in this life, so you need to make choices. And hopefully your choices can come from a deep sense of who you are." - Mister Rogers
 

Reassuring feedback guys. So the market is going to be around for a while (indefinitely)? I've read about countries that issue debt straight through their own website and skip the middle man. But I don't see that happening in the US since it's huge...

So slimmer profits have been happening. Is that likely to keep happening or will the bounce back? My only concern is that it continues and they end up paying PF bankers less. I'm completely fine with the compensation. I don't think anyone could complain about 600k-1m+ as a salary. But do you all think pay could go down if the business continues to become less lucrative for the underwriters?

 
samtyler94cc:
I've read about countries that issue debt straight through their own website and skip the middle man. But I don't see that happening in the US since it's huge...

Public Finance doesn't deal with Federal Gov't issued obligations, you will be working with Cities, Counties, States, Universities, Authorities, Utilities, etc. This won't be changing any time soon (ie in the next 30+ years).

samtyler94cc:

So slimmer profits have been happening. Is that likely to keep happening or will the bounce back? My only concern is that it continues and they end up paying PF bankers less. I'm completely fine with the compensation. I don't think anyone could complain about 600k-1m+ as a salary. But do you all think pay could go down if the business continues to become less lucrative for the underwriters?

Slimmer profits are most likely here to stay. Underwriter spreads are significantly compressed and I don't see that changing. Unless the risk profile of underwriting municipal debt changes in a major way they will stay where they are at now. There may be a small spike in fees (both FA and underwriter) under the guise of the new regulations that are in place/coming into place shortly.

For you to be making 600k-1m+ as salary you will have to be at the Director/Executive Director level with a stable of large/regular issuers (major Cities/utilities that issue $1b+ in debt yearly). I wouldn't expect someone to be at that point in the first 15-20 years of their career.

This to all my hatin' folks seeing me getting guac right now..
 

Sounds good. If I like this internship I'm pretty sure I'll go ahead and pursue a SA position in public finance or this upcoming summer.

Last question for you guys, how much do Public Finance SA usually get paid? Is it usually the same as IBD SA interns? Along the lines of the MM banks I listed

Again, I super appreciate the knowledgeable/useful answers I got compared to what you usually read about public finance on here. Thanks guys

 
M&I Interview with PubFin Banker:

Brian: And now for the question we all want to know about: the pay. I’ve heard everything from “Public finance pay is the same as IB” to “You get paid way less” to “Sometimes you can make even more!” What’s the real story? Banker: At my specific firm, it has been roughly the same as investment banking pay the past few years, at least at the analyst level. So you might earn a $70K-$90K USD base salary, and in a good year you might get 70 – 90% of that for your bonus. In a bad year, bonuses might be dramatically lower (think $10-20K USD).

This is from memory, but if I recall correctly, it was 70K Base, 55K FY Bonus (roughly 80%), and 10k sign-on bonus, equating to roughly 135K. Maybe this was a particularly good year for his group, and abnormal (oh god I hope not) most of the time. Next year I can confirm or deny everything. Don't want to misguide anyone. Hopefully anyone else can shed light on the matter.

 

I can say public finance bankers at Wells pull in 70k some signing (10ishk or 7.5k) and then 30-50k bonus range for 1st year. Very rarely are top bonuses given.

From what I can tell from a PF intern, she would rather doing regular investment banking. Hours can be close to IB, but WF is a decent PF spot. I've seen some of the models, and it is definitely less exciting. Debt waterfalls is something a lot of the interns do I think.

 

sorry guys, i know very little about public finance so I can't answer your questions..rest assured that our member base is growing rapidly with every day and eventually it is my goal that no question goes unanswered. Unfortunately, because we are so new, we are still under 1,000 members (but closing in fast). We appreciate your support and look forward to any suggestions you have to help us improve the site.

Thanks.

 

I worked for a public finance bank last summer and a lot of bankers end up on the boards of universities or other tax-exempt debt issuers.... but thats generally MDs after they leave banking

 

its not looked upon as highly as any of the corp fin groups as the spreads in the business are very thin therefore bankers make less, not to mention the projects arent as sexy as you are advising public sector clients instead of GE or any other big name company. you get exposure to fixed income and derivatives which is a good thing but you dont get the heavy modeling the guys in corp fin do which is a bad thing. since its all debt financing you arent exposed to as much accounting as corp fin which is also not a good thing in terms of exit ops. hours are a little better than corp fin but not much, basically 9-11 pm on average (can be better or worse depending on what is on your plate) with weekend work the norm. exit ops for corp fin are much better but I have seen guys move to hedge funds, small PE firms, as well as move to corp fin roles. imo, if you have a corp fin offer Id take corp fin as a few more hours at work now will pay off in the long run with better exit ops as a majority of people won't be in banking forever. now if its your only front office offer I wouldnt think twice about taking it.

 

Was just coming here to ask a public finance question. I'm trying to gather a list of MM banks in NYC that either focus solely on municipal finance or have a public finance division, but this isn't an easy thing to find online.

Anyone know of a resource that might have this? Or equally as helpful, please list any firms you know of. Thanks.

 

The lifestyle is way better. From what I understand, all you do is muni bonds all day. It's very hard to go buyside from it. At my bank, base is the same, but bonus numbers are probably a little lower not sure. The exit opportunities aren't as good as coverage or m&a. More people seem to stay in the group and make it a career. It is probably a combination of having less opportunities and having a better lifestyle than people in coverage.

 

although i can not speak for public finance IB specifically, i did work in a pubic finance advisory role (involved in the sizing and structuring of debt for municipal clients), which is close enough. one of our senior analysts went off to get an MPA from Georgetown, which is fairly reputable as far as MPAs go, if i'm not mistaking.

Money Never Sleeps? More like Money Never SUCKS amirite?!?!?!?
 

no banking, he had very different goals. he's still in the program, and has since done internships at the US Department of Labor, and the Office of Management and Budget. i had however heard of senior management at rival firms with MPA/MPP degrees.

although i'm not certain (i left that job some time ago), i think having a public finance ibanking background should give you an edge over more traditional MPA candidates since MPAs with strong finance/accounting skills are hard to come by.

Money Never Sleeps? More like Money Never SUCKS amirite?!?!?!?
 
  1. There is modeling, it's more plug and chug than excel. From what I heard from a second year analyst in BB Pubfin, they have a program where you basically put in the numbers.

  2. Exit opps are considered to be eh at best. I've never seen this huge rush out like there is in M&A, LevFin, Sponsors, FIG etc. to get out.

  3. The lifestyle seems much more humane. Hours for analysts at the BB were 50-60, below market bonus, all-in maybe 10-15% less. It was described by a director as "more technical" in regards to bond underwriting. It seems a pretty pleasant place to be. I would say that Barcap is particularly strong, it basically acquired all of Lehman's pubfin, in the MM space Piper Jaffray seems to be strong. In addition, the people seem relatively happy at the BB I visited. The director I spoke to there loved his job and the second year analyst loved it. This is in stark contrast to some other people and groups I talked to.

 

I believe public finance is more middle office? Sorry man you can't get into IB from there. MBA time, you're done

I'm gonna get that bish some binary Bishes love binary --------- Kind Regards, Bin_Ban
 
Binary_Bankster:
I believe public finance is more middle office? Sorry man you can't get into IB from there. MBA time, you're done

Don't be stupid. Do research before you start bashing out nonsense. http://www.jpmorgan.com/pages/jpmorgan/investbk/solutions/fixedincome/publicfinance. For example in JP Morgan, Public Finance is put under "Fixed Income Product" and it is IBD. A friend of mine worked at that group and I am damn sure it is not middle office.

From M&I Most of the time it’s in the Capital Markets Group of an investment bank. But some banks (e.g. Goldman Sachs) just put it under their investment banking division and call it “Public Sector and Infrastructure” (PSI). Morgan Stanley puts it under “Sales & Trading” for some inexplicable reason, so there isn’t much consistency among banks. At boutiques it’s simpler because public finance-focused firms tend to do public finance and not much else.

“Public Finance” is a confusing term because it encompasses several different areas, and some banks / groups focus on one area while others do everything:

Underwriting Municipal Securities: Here, you help the entities above underwrite debt that they need to build new assets like airports, bridges, ports, railroads, and so on, or to refinance their existing debt. This is what my group does, and what we’ll focus on here.

Project Finance: You’re not necessarily working with tax-exempt entities here, and you can use debt and equity to fund projects. There is some overlap with public finance, but most of the time it’s a separate group.

Utilities & Infrastructure: What it sounds like – advising utilities and infrastructure companies on M&A and underwriting debt and equity. More similar to traditional investment banking.

"I am the hero of the story. I don't need to be saved."
 

Where does your interest actually lie? B school is just a means to an end, I am confused when people actually view it as a goal in and of itself. Also these can both be very broad fields, doing RFPs for GOs all day is vastly different than doing 142(d) deals for start up housing development with a project finance component, also where will you be in terms of credit quality? Doing unrated deals is a lot more fun than taking a seasoned IG issuer to the market for a GO. The same is true for venture debt, biotech and tech look nothing alike in terms of analysis and an early stage start up is going to be in a different world than a post-revenue company, where in the lifecycle are you going to be?

 

guyfromct sorry for the delay and thanks for the response.

My interest lies in the next best opportunity, and whether that entails me working for 5-6 years then going to B-school because the bank I work for believes so, then I would. I feel the B-school could be helpful from "having an extensive network prospective" though.

In terms of credit quality - it seems that the BB firm I was speaking with does a ton of different deals from highly rated to unrated. The group I would work with would be Healthcare.

Lifecycle wise for the venture debt role it is primarily early stage companies where the underwriting is from $5-20mm in credit facilities. It would be a venture debt training program (similar to commercial banking/credit analysis) and I would get exposure to a very unique tech/life science sector.

A few questions while you are here on Public Finance: 1) What is the career path and day-to-day of an analyst right now? 2) Comp/hours/lifestyle in regards to locations of NYC/Chicago/San Fran? 3) Growth of industry moving forward - especially in the healthcare space?

Thanks ahead of time, it is very appreciated.

 

No. Why? Because 99% of the time there is no equity in the capital structure (we're talking about governments, government conduits, and non-profits here), and even if there happens to be some equity component (happens in the not-for-profit healthcare and infra groups from time to time), it is never publicly traded.

A BB might have fixed income research people focused on munis, but like maybe 3-4 at most.

 

When considering which firms to apply to in Public Finance you should consider several things, which firm is the best fit for you in terms of culture, which firm will get you the best deal flow and which firm you feel has the best reputation. As you begin your career, its important to make sure that you are in a place where you can learn the most and build a strong deal sheet. In terms of BB vs. boutiques, again I would focus on these criteria, most of all being fit. In terms of deal flow, you can find the top banks on the league tables and understand who is doing the most deals in your area of interest.

 

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