Comments (38)

  • Intern in IB-M&A
Aug 6, 2022 - 9:40pm

other banks had return percentages that were way higher so youre just selectively using data. JPM also has 270k employees and a CEO who is known for putting a huge emphasis on a fortress balance sheet

and who knows re: next few years

Most Helpful
Aug 6, 2022 - 10:42pm
mergersandacquisitions78, what's your opinion? Comment below:

My view. We are in the top of the first inning of the bloodbath and three years from the trough.

- IB headcount will be down 40-50% in the next three years through attrition and layoffs. Maybe more. The analyst bonuses at several firms are a kind way of telling people to GTFO

- Banks will protect their stars at every level. Just "above average" players will see their comp fall. Average and below are unlikely to survive and if they do, there is no reason to pay them well

- Analysts will have smaller classes; associates and VPs and Ds and average MDs are where the real pain will happen

- Amongst the large firms, American banks will continue to consolidate market share plus possibly Barclays and DB. But this will be on a much smaller market and there will be a lot of pain

- Middle market firms will continue to perform well although at many shops (JEF, HL), there is over staffing and I can see these firms being brutal in order to pay their producers

- Independent firms will diverge in their fortunes, some illustrious names will be decimated, some will muddle through. Overall, it will be tough. I would still prefer to be at these or the MM firms in a downturn because they tend to be less political and advisory work is less cyclical

- Those that survive will do very well in the next cycle; it's often a blessing to start in a downturn if you can make it through

- Whatever hits banking will hit law and consulting equally hard, and tech much much  harder. Amongst high paying professions there will be little room to run

in summary, I see a bad moon rising

Funniest
Aug 7, 2022 - 2:36am
Tyrannosaurus-RX, what's your opinion? Comment below:
mergersandacquisitions78

My view. We are in the top of the first inning of the bloodbath and three years from the trough.

- IB headcount will be down 40-50% in the next three years through attrition and layoffs. Maybe more. The analyst bonuses at several firms are a kind way of telling people to GTFO

- Banks will protect their stars at every level. Just "above average" players will see their comp fall. Average and below are unlikely to survive and if they do, there is no reason to pay them well

- Analysts will have smaller classes; associates and VPs and Ds and average MDs are where the real pain will happen

- Amongst the large firms, American banks will continue to consolidate market share plus possibly Barclays and DB. But this will be on a much smaller market and there will be a lot of pain

- Middle market firms will continue to perform well although at many shops (JEF, HL), there is over staffing and I can see these firms being brutal in order to pay their producers

- Independent firms will diverge in their fortunes, some illustrious names will be decimated, some will muddle through. Overall, it will be tough. I would still prefer to be at these or the MM firms in a downturn because they tend to be less political and advisory work is less cyclical

- Those that survive will do very well in the next cycle; it's often a blessing to start in a downturn if you can make it through

- Whatever hits banking will hit law and consulting equally hard, and tech much much  harder. Amongst high paying professions there will be little room to run

in summary, I see a bad moon rising

Soruce: Trust me bro

  • Analyst 1 in IB - Cov
Aug 7, 2022 - 10:41am

Appreciate your honest take and trust you've seen things a long time so know better than most but feel like this is way to precise of a prediction

On what basis do you think things will recover in 3 years? 40-50% also seems really punitive, that's like half the headcount at major banks, you really think they'll fire that many people in this cycle? Even in 2008 some of the major banks didn't cut that much

Aug 7, 2022 - 12:09pm
mergersandacquisitions78, what's your opinion? Comment below:

Appreciate your honest take and trust you've seen things a long time so know better than most but feel like this is way to precise of a prediction

On what basis do you think things will recover in 3 years? 40-50% also seems really punitive, that's like half the headcount at major banks, you really think they'll fire that many people in this cycle? Even in 2008 some of the major banks didn't cut that much

I'm a banker - it's my job to be precise when dealing with uncertainty (what we do when we recommend a specific purchase price to a client or price a bond).

2008 is the wrong comparison. Banking fees actually didn't drop and capital markets were close for no longer than a month. Rescue financings and balance sheet repair made 2009 a good year, and you saw banks like Barclays and Jefferies bid aggressively for bankers. I don't think headcount fell.

2001 to 2004 and 1990 to 1993 feel much more comparable in terms of how long markets are shut. The three years is a guess based on the comps. It generally takes a year of shellshock (which is now), a year of bloodletting and a year of recovery. In each of those markets, banking headcount fell 40-50% and the overhiring was greater this time.

and why I feel this persists.

Equity and HY capital markets have been shut for the better part of six months. This didn't happen in 2008 and is worse than 2001.

Bulge bracket banking revenues are down 50%+. Comparable to 2001. M&A will do ok but it can't conpensate for loss of ECM and HY.

Large balance sheet losses for hung LBOs. Goldman losing money is a canary in a coal mine.

and an increasing acknowledgment relative to the past that at most banks 20% of the people bring in 80% of the money which means a lot more understanding that you need to pay your stars and everyone else is expendable 

  • Analyst 2 in IB-M&A
Aug 7, 2022 - 8:50am

So much fear mongering going on. Sure bonuses and M&A volume won't be at peak Covid level but this isn't going to be an '08. I think we as a generation just aren't used to recessions when they're a pretty normal aspect of the economical cycle.

Aug 9, 2022 - 5:27pm
corporateguy, what's your opinion? Comment below:

Cant comment on current state of affairs in banks since I am no longer a banker but I started my analyst program in 2008 at a bulge bracket so can give some color on what happened in 2008 and don't think this is comparable in terms of magnitude

I was a summer in 2007 which was a record year for analyst bonus (top tier first year analyst at $70K with $60K base, thank god for inflation) but even towards end of my summer the doom was coming and most bankers were already cautious and telling incoming analyst they were unlikely to get anything like that.

Anyways when I started in summer 2008 you started living the recession with very limited live deal flow and obviously all the news including Lehman's BK. There was a first round of layoffs in September '08 and it was mostly bad performers at Associate and VP level. There was a second round in December '08 and this one impacted 3rd year analyst, associates, and VPs and it included top performers and probably 10 to 15% of most groups. This second round included 1st year analyst in DCM and ECM but not IBD.

There was a third round in March '09 of mostly 1st year analyst and associates. 

But by October '09 most groups were looking to hire. My group let go 4 analyst, 2 associates and end up hiring 2 analyst in October '09. Also there was a decent salary bump in summer '09 ($60k to $70K)

  • Associate 2 in PE - LBOs
Aug 9, 2022 - 5:31pm

Doubt this will be as bad as '08. The GFC was a financial crisis originating in the banking system itself and led to the failure of multiple large financial institutions. Not every crisis results in 50%+ headcount reductions. 

  • VP in IB - Gen
Aug 9, 2022 - 5:38pm

No chance this is '08 - there was a systemic crisis predicated by the housing market that caused a chain reaction.  This is just a case of over-exuberance and over-valuation.  The one wild card is rarely have we seen rates rise as an economy slows but I imagine that will be a self-fulfilling prophecy and we'll go back to cutting sooner rather than later.

  • Associate 2 in PE - LBOs
Aug 9, 2022 - 6:23pm

The last time we had stagflation, it was followed by a huge LBO boom and the golden age of high finance. Not saying the same will happen again as the industry today is clearly at a very different stage of growth. But any claims that headcount will drop 50%+ are equally exaggerated.

Aug 10, 2022 - 3:28am
halo5guardians, what's your opinion? Comment below:

This thread makes me scared about the uncertainty. I literally went into this sector at the worst possible timing.

Especially the prediction by @mergersandacquistions78

Aug 11, 2022 - 1:28pm
corporateguy, what's your opinion? Comment below:

You should'nt, most likely impact for you would be a low bonus and

  1. Unlikely if not close to impossible to be as bad as '08/'09
  2. Analyst are always the last to go
  3. Companies give good severance packages (in '08/'09 they gave three moths salaries and 6 month COBRA coverage)
  4. Anecdotally none of the analyst or associate I knew who got cut had their career negatively impacted long-term and actually will say the most successful person i knew from my analyst class was one of the guys that got let go 
Aug 10, 2022 - 8:17am
Devils Advocate, what's your opinion? Comment below:

I have a feeling that anyone thinking we are going to go through a 2008/2009 experience was not in banking in 2008/2009.

I was and it was scary as fuck. This doesn't even remotely compare 

Aug 11, 2022 - 2:20pm
high hopes, what's your opinion? Comment below:
Devils Advocate

I have a feeling that anyone thinking we are going to go through a 2008/2009 experience was not in banking in 2008/2009.

I was and it was scary as fuck. This doesn't even remotely compare 

Recent bias. Most analysts were being birthed during dot com bust. 
 

this is a tech bust with real estate bubble popping. Both are huge components of the S&P and will hurt everyone bc of passive management 

Aug 14, 2022 - 5:26am
magz4bankz, what's your opinion? Comment below:

What are you talking about? Real estate is strong, my group has been active in RMBS

Aug 11, 2022 - 2:47pm
musclemonkey, what's your opinion? Comment below:

People who keep saying consumer balance sheets are strong haven't spoken to anyone outside of IB recently

  • VP in IB - Gen
Aug 16, 2022 - 8:36pm

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