Pay Freeze for Junior Bankers - Bloomberg

Cutting analyst pay is a terrible move.

This is hilarious:

Younger bankers, who typically comprise about 75 percent of the investment-banking workforce of the biggest Wall Street firms, often start with a $200,000 annual salary and can expect $240,000 or $250,000 in the second year, said two senior bankers.

Of course, they're talking about associates. Analysts don't even count, lol.

"Will banks still be able to attract the talent they seek?"

In this economy can they offer positions that pay 250k/year and still get the talent they seek? Did you actually just write that?

PetEng, you've completely misunderstood the whole article and my point. If you use your "analytical" skills you'll be able to see that banks are thinking about stopping their high salaries. Hence, bankers won't be able to get to 250k/year unless they've been in the industry for 6 years minimum.

With the likes of the BBs cutting pay, what's to stop top bankers shifting to say Evercore, Lazard, Rothschild etc. who would be more than willing to compete on pay in order to increase their dealflow etc.

Who knows, might be the start of a power shift...

So your argument is that the factors which are affecting the BB compensation don't affect the smaller firms - fair enough. But that doesn't change regardless. The smaller firms can overpay to increase dealflow right now.

My point is that the same macro forces influencing BB comp is affecting a multitude of financial service professionals. An entire industry is being remade before our eyes.

You are much more optimistic than myself. The profitability of an entire industry is declining. I won't be surprised if salaries are lowered and stay at a reduced level for awhile.

It's going to be interesting regardless. I can't see junior bankers being incentivised into working crazy hours if they're only going to be getting £50-60k for their first three years etc. No one in their right mind is going to thrash out 85hour weeks for that salary without seeing a bonus or a sharp increase in pay as they proceed year on year, it's just not worth it, even though there are hundreds of young graduates who dream of this job, they just don't know what they're in stall for.

Would be interesting to see which firm makes the first move though, sounds like Credit Suisse according to the article... might be M&A suicide on their part, would be funny to see GS/MS/JP grab up some of their top bankers to boost themselves even more in Europe.

Interesting read, hope this isn't going to be the case to be honest. I've been slaying my fucking balls off recently and I need to see that green to make it all worth it!

You've got a point BSD with the incentives, but like you said, there are hundreds of people lining up for the job we do, so they shouldn't have a problem filling junior roles, more so they should be worried about freezing pay to the VP's and above who actually bring something more to the firm rather than excel crunching.

I'm interested to know where 1st year Analyst starts on a salary of 200k so I can move there...

so... if junior bankers = associates, will analyst comp basically be the same as 2011?

I don't think analyst comp is a big enough portion of total comp to make it worth their time messing with. That being said, you really can't mess with associate salary without adjusting analyst salary, otherwise you'll have 3rd year analysts extremely close to 1st year associate comp. The amount of associates is so little that you would have to make huge changes to their pay in order to make it worthwhile to the firm, and when you have 3rd year analysts making $160-170k on average it makes that pretty difficult. Associates really are the least producing portion of the IB structure because they have very little client facetime (if any) and don't know much more than a decent 2nd year analyst. It makes sense that they would be the ones targeted for an adjustment, but I think the more the banks look at this they'll realize that there isn't much they can do.

Sound's like the banks will have to make up their minds pretty soon on what they are going to be doing regarding salary structure since many are expecting their bonus soon. The article was indicating that CS have already made their mind up and will be the first one to try and test the waters and the rest are going to follow based on how they fare.