Sorry had to post this, but would like to hear some criticism of the article..
From the ever-reliable Forbes:
The profession’s recent indignities aren’t just a post-recession hangover.
Investment bankers used to rule the world. Now J.P. Morgan chief Jamie Dimon has to explain to investors why the bank is even in that business anymore. (It’s still a service that clients need, he said during a call in January.)How times have changed. Over the past year the indignities mounted for banks’ onetime profit centers. The leading person to succeed Dimon at J.P. Morgan, Gordon Smith, runs consumer banking. Swiss giant Credit Suisse’s new CEO comes from insurance. Many large European banks are getting out of investment banking completely. And the ultimate insult: Wells Fargo and U.S. Bank, once derided for sticking to straight lending, are now more profitable than lords of finance Goldman Sachs and Morgan Stanley.
The irony is that these should be good times for Wall Street. Mergers and IPOs are back. Stock indexes are at all-time highs. Activist investors are launching hostile takeovers. And yet the Street’s profit machine seems broken. The average bank has a return on equity of 8% these days, down from 18% before the financial crisis, according to RBC Capital Markets. Much of the drop has been in investment banking.
Regulation has a lot to do with that, pushing the big banks out of Wall Street’s most profitable (and riskiest) businesses. Leverage has long been key to big investment-banking profits, but new capital rules and stress tests make it hard for the big banks to borrow. Low interest rates and never-ending lawsuits haven’t helped.Just after the crisis, bankers’ malaise seemed temporary. Seven years later the famed $20 million bonus checks have vanished, but there is no shortage of work to do, and the Street is losing faith. Rik Kopelan, a top Wall Street recruiter, says it’s hard to find people who want to switch firms. The only move people want to make is out of finance. More may go the way of one senior Bank of America investment banker who recently fled his once-coveted perch: He’s headed to a nonprofit.
http://fortune.com/2015/03/31/bad-times-for-investment-bankers-are-here…
By only covering part of the story, this article completely misses the point. If the services of these divisions have been pushed out of "traditional" banks, then they went somewhere else. Non-bank lending and capital raise firms are flourishing right now. With the amount of regulation that came down on banks, it just made sense that this would happen.
What the news media is referring to when they talk about "investment banking" is a lot more inclusive than how that term is used on these boards. They are including s&t and structured products in "investment banking". They might even think pwm and research fall into that category as well.
Regulators seem to be basically OK with plain Jane stocks, bonds, and mergers and charging fees for issuing these securities and effecting these transactions.
They don't like complex derivatives and transaction and fund structures that avoid taxes.
Regular pure-play advisory banking is perfectly healthy and still a great industry to work in, not least because of the exit opportunities for people who develop what is still a highly sought after skill and knowledge set.
This.
It drives me absolutely bonkers how the media lump just about anyone who works at JPM, GS, MS, BAC, Citi, etc. in the investment banking pile.
In truth, the areas of pain for bulge bracket banks is pretty much anything that involves capital. The caveat to this is that once enough firms leave the market for S&T, structured finance, derivatives, etc., there's going to be a juicy market with minimal competition for any firm that's willing to participate. With everyone expecting Credit Suisse to massively retrench from market-making, Deutsche Bank will be the only major European BB left (compared to when CS, UBS, RBS, et.al were active pre-09).
It's incredible that you can work at a business/finance magazine and not know the difference between sales & trading and investment banking.
"The irony is that these should be good times for Wall Street. Mergers and IPOs are back." Guess what - so is fees paid, which was at its highest since 2007 in 2014 (http://www.reuters.com/article/2014/12/23/investment-banking-fees-idUSL…)
Banks are struggling in sales & trading as the product becomes increasingly commoditized. That's just not investment banking, it's trading.
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[quote=Red3]
@Oreos Accounting? JP? It's not even that hard to find the bankers. Look for the guys wearing a suit, that's how you Really separate the wheat from the chaff.
Headline revenue figures haven't changed by much:
However, profitability remains an issue:
And consequently, valuation:
This is when innovation happens.
great read
With the increased scrutiny on s&t, would it make sense at any point for the BB's to spin off their IB divisions?
For us junior analysts, pay just went up across the board. Obviously there are wider factors to consider, but I consider a raise to be a good time.
http://www.wallstreetoasis.com/forums/2015-analyst-salary-bump-megathre…
Similar to companies issuing/increasing a dividend to keep investors happy (even when they're struggling financially), pay increases are not always a good sign...
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