Do large diversified financial institutions offer more job security compared to pure Investment Banks and Boutiques?
In times like now in which IB fees are dramatically dropping (ECM down by 80%, M&A slowing down, less DCM and Leveraged Finance activity...), do Investment Banking professionals at large diversified financial institutions (Citi, JP Morgan, BoA, Wells Fargo, RBC) with a more balanced mix of revenues (IB vs Commercial and consumer banking) enjoy a better job security compared to those professionals working at pure Investment Banks (Goldman, Morgan Stanley, Jefferies) or elite boutiques?
Since revenues at diversified banks will not drop so drastically, is it possible that they decide to lay off less people and fill the bonuses pool with funding from other business lines? Or will Corporate and Investment Banking Groups at these companies will be treated like a separate entity and they will fire as many people as at pure Investment Banks?
Probably the dumbest question I´ve seen in a while.
Short answer: NO
There is no difference between working at a large bank and working at an M&A boutique with 15 employees. If there is not work to do there will be lay offs, simple as that. Banks are not charitable organisations, they look to maximise their ROE, and at some point they will decide to stop paying 6 digits salaries to Investment Bankers if they don't deliver, even if that year the consumer finance division set a record.
When Wells Fargo or Citigroup decide to cut people, they will not look at their consolidated P&L, they will evaluate each subsidiary independently, and if revenues at their Corporate & Investment Bank groups fall by 40% they will fire people, even though in their P&L they may report $50bn in revenues, and $6bn in profits.
This may be generally true but there are certainly exceptions - my bank (large MM) is very explicit that banking is cyclical whereas other businesses (PWM, asset management, etc) are very stable, and the point of being one bank is that the stable business lines help reduce instability on investment banking side. In a good year means the bankers are probably losing a little bit of bonus pool to other divisions, but my bank has made it clear they won’t do short term layoffs because more stable business lines will keep the ship steady. Bonuses will certainly fall but there is value in diversified revenue
That’s why most EBs have big RX teams - to help prevent downturns in M&A from harming the bank too much
I'm sorry but this makes no sense. If market activity collapses, a bank that does not derive its entire revenue from investment banking will clearly be more hesitant to cut staff than a bank/firm that derives 100% of its revenue from it.
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