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I would assume that a nationalized bank will continue to perform the majority of its core banking functions. As an analyst/associate in an IB capacity, I would imagine that employment would not be immediately at risk (as layoffs have already reduced headcount to skeleton-crew levels in some areas). Just because ownership has temporarily changed, does not mean core banking functions cease to exist. I would imagine the investment bank would continue operations as usual.
In terms of compensation, I would imagine that only the top guys would be most affected; analyst and associate bonuses aren't supposed to be that great in the current markets anyway (regardless of the company in question). This may cause top talent to leave, which may adversely affect your group's ability to bring in business.
I just read a recent article on WSJ.com saying that Citi may approach the US about taking a larger stake in the company (exercising options on preferred shares to increase ownership up to somewhere between 25% and 40%) with the intention of increasing tangible common equity. Even if this were to happen, I don't believe analyst/associate positions will be affected much (this is my optimistic position for those who work for/will work for these banks).
I definitely think there may be some affects on prestige; and this, in turn, may affect exit ops for some.
would be interested to see what everyone else thinks
IBchimp,
I'm not a bank corporate strategist but I think almost every single call you made is wrong (i.e. less likely to happen than its alternate).
Why do you "definitely" think prestige would be decreased if Citi gets nationalized? What do you think prestige is and how do you think it relates to the ever elusive exit opps?
I wonder, if a nationalized bank means everyone is technically a government employee and therefore analyst work hours would be more closely scrutinized. Some of the stuff I've put up with as an analyst would be considered pretty inhumane.
~~~~~~~~~~~ CompBanker
Way to find the silver lining, CompBanker!
Government involvement would have to be fairly limited to avoid very real conflicts of interest. It is unlikely the government would lay off large numbers of junior people, as the irony of politicians firing 25 year old employees with one hand while proclaiming their plans for creating X-million jobs would be too much even for Washington. Could certainly see deal flow being impacted, as some companies would likely be hesitant to trust the government to represent their interests, and I could see that in turn hurting exit ops. Also, because people are less likely to want to work for a nationalized bank, I could see the reduced caliber of applicants reducing exit ops by extension. CompBanker might actually be right about shorter hours, I could certainly see guys who figure the government can't tell if they're doing their job or not just not doing anything (or having anything to do) and probably getting away with it.
Nationalization doesn't mean that suddenly Citi will turn into the US Postal service, it just means that the guy at the top is now the US govt. Your MDs, VPs and associates will all be the same people with same demands and same expectations. There will almost definitely be changes made to the way business is done (maybe clamping down on some of the more "questionable" practices) but on a day to day basis, it shouldn't be vastly different for an analyst.
Ideating,
Maybe using the word "prestige" was a little strong and a little vague (I agree..."prestige" is hard to qualify). I was just responding to the language in the original question. What I meant was this: Is it possible that there may be a negative stigma associated with working for a "nationalized" bank? Specifically, could assumptions about how business is run in an analyst's (nationalized) bank affect how marketable he/she is at the end of the analyst program relative to how marketable others are from other banks? I shouldn't have said "definitely" either, as I cannot begin to claim I know an answer with any certainty.
If nationalization were to happen, I'd assume sales and trading practices would be affected far more than investment banking practices.
I agree. That's what I was getting at with my first post; I don't think that advisory services would be most immediately affected by nationalization.
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