Are high profits sustainable, or does the industry need to hire more people? It may only be tiny violins that most people would play for overworked junior investment bankers on Wall Street. But their concerns do raise some interesting questions for investors about the profit surge in the industry.
The New York City securities industry’s average bonus as tallied by the New York state comptroller grew 10% in 2020 from the prior year, while pretax profits for securities broker-dealers grew 81%. Using compensation ratios compiled by analysts at Barclays for Morgan Stanley and JPMorgan Chase for their investment-banking units, and for Goldman Sachs Group across the firm, the average ratio of compensation expense to revenue was about 29% in 2020, down from over 32% the prior year.
The question now is how much of that operating leverage in investment banking was driven not just by scaling their technologies and platforms, but by relatively smaller human workforces putting in unsustainable efforts. Wall Street has for some time had to fight to keep many of its most talented junior employees from jumping to clients and startups that have been stealing market share—so their relative happiness, while perhaps not society’s top concern right now, is of interest to investors.
Source WSJ
https://www.wsj.com/articles/all-work-and-no-play-could-make-wall-street-less-profitable-11617037002
Def true. Banks will see / are seeing lower intern and analyst retention rates for a reason. You can be paid as much and have the same or better exit oops with MUCH better quality of life at other firms in different industries (consulting, tech, data science, other non IB finance like AM and trading.)
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