Is the weight of regulation killing investment banking as we see it now? How will it adapt?
The basel comitee, capital requirements and government regulation has had a major effect on I-banking and its future which now looks bleak.
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I feel like this is an essay question for a summer class.
honestly its not, im an intern...reading lots by different institutions on investment banking
How so? Investment Banking is a purely advisory role for the bank, unless you're just talking about Investment Banks as a whole. Advisory isn't affected by capital requirements.
sorry i mean investment banks as a whole
Understanding what investment banking is would be a good idea before asking dumb questions.
IB revenues also generally rely heavily on capital markets, which are affected by capital requirements.
True, ib does depend on capital markets which means that the banks themselves wouldn't be capable of holding riskier assets in order to finance deals as much as they would like to or could have in the past. But I struggle to see it mean the end of the industry. Like SmokeyG said, its not like companies are going to forget about raising capital, merging/acquiring others, or restructuring.
this is definitely somebody's homework assignment
its not just been reading lots want to see what other think (im currently an intern in ib)
http://www.wallstreetoasis.com/forums/future-of-investment-banking-from…
I swear this question and 'Is trading dying?' get asked bi-monthly
i think i even saw a "is I-banking living?" thread pop up recently
Yes, actually. Companies collectively decided yesterday that they no longer need to raise capital or pursue inorganic growth opportunities going forward for infinity. They also decided to never require restructuring of any sort and - on top of that - swore off expert financial advice for good.
This... oh man. I was dying.
Yes. Delete your account, avoid the finance club at your high school, listen to your parents, and follow your heart.
Bleak future and yet were seeing a record years in terms of fees and deal size...
Please check the league tables from year to year and let us know what you think.
no
IB is fine. Check the half year review that was posted a few weeks ago. Silly inquiry.
Even for pure advisory firms, the regulatory environment has and will keep on seriously impacting margins and profitability.
Have a quick look at annual reports published by banks and boutiques and you will realise that the Legal & Compliance department tends to be fastest growing cost "burden".
Clients are much more demanding, no longer willing to pay crazy fees and tend to renegotiate post closing.
The model has already changed a lot and should keep on evolving...
S&T is completely different beast from IBD so not sure where the questions is going
Is IB Becoming a Dying Field (Originally Posted: 09/26/2012)
I see the majority of people on WSO continue to look at IB as their initial career path, but overall is the field dying? I've talked with everyone from MD's at BB's to other Directors who having hiring power and they're all saying IB is moving in the wrong direction. At least at BB's and elite boutiques they're saying that unless you go to a top target, it's hard to break into the field and many people now are bolting for HF and PE firms. A few of these MD's have even said that they wouldn't be surprised if within 5 years, some of the BB's completely slashed their IB departments.
They pay is down, yet the hours remain the same. Your bonus is uncertain and the life sucks. It just seems that aside from the exit opps, the prestige of IB isn't the same as it was pre-crisis. So is it worth it to start looking more intently at other fields or is IB still the dream?
You answered you own question: "many people now are bolting for HF and PE" How do you think they were able to bolt for those opportunties. Until investment banking stops providing the preftigous exit opps then its still the dream
I agree with Maverick, but we cannot ignore the fact that IB, as a whole, is becoming less and less of a jackpot in itself. Bonuses have gone way down, analysts are getting fired left and right, less bankers are hired...IB is definitely not at its peak, and the continuous investment bank scandals and a shitty economy will do nothing to improve this situation, which I think will get worse. It is not "dying", in my view, however.
IB goes through boom and bust cycles. Did you know that in the 70's nobody wanted to work on Wall St? It was a place for losers.
Now we are in another bust cycle and it's probably going to last until 2020 at a minimum. I'd rather find a new career path. Why wait?
analysts aren't getting fired left and right
Like any job, you should only do it if you somewhat enjoy the nature of the work. Do not enslave yourself for 2 years and end up burnt out and depressed.
Jobs are never to be taken for granted and is never guaranteed, especially in the financial services sector. Is investment banking dying? No. Is it going through a bust cycle? Yes.
And to echo above, analysts are not being fired left and right.
Discussion: Is Invesment Banking Dying? (Originally Posted: 08/01/2007)
With all the recent market instability, it seems that IB deal volume is going to a halt, maybe first time since 2002.
What would you say about the future of IB in like 5 or 10 years?
As a SA at a top BB I am very interested to see what people's opinion on this is.
Please no flaming and keep it to a civilized discussion.
And I am refering to the traditional IBD such as M&A, not S&T or any other part of the bank.
I think this would help people interested in IB career decide whether to pursue or not.
M&A activity will probably be decent, since for once the strategics with all their lovely vanilla corporate paper and fine credit ratings won't be fighting money-grubbing financials (having lost their cheap debt, of course). So long as equities hold up a little better than debt has (jury's definitely still out on that) shouldn't see everything come to a crashing halt instantly.
Asking one to predict the future of IB in 5 or 10 years is like asking someone in '97 or '98. Good times, might be a correction, might keep going for another couple years, but either way life goes on.
What you're missing here is the fact that absent the aggressive bids from "money grubbing" financial buyers, companies would have diminished incentives to actually put themselves up for a sale in the first place. While it's not entirely analogous, one can draw several parallels to residential or commercial real estate, where liquidity hits much harder than price, and reduced liquidity = reduced M&A activity. It’s pretty zero-sum at the end of the day - if it’s good for the buyer, then its bad for the seller.
if the market's crash, the way corporations begin to become leaner is by merging and saving costs...so M&A get's business.
also, all these firms that all the PE firms took private will eventually go public. Capital markets will be needed to take them public again.
I agree with ballyho, it might get slow for a bit, but it will rebound.
Not trying to be an asshole, but just take a look at M&A activity in '01 and '02 and tell me with a straight face that corporations resort to M&A in down markets. Quite the opposite, actually, since everyone thinks they are undervalued (which is pretty justified considering multiples across the board were so low in '01-'02) in a down market.
Also, it seems pretty counter-intuitive to assume that companies are looking for M&A synergies only in a down market, considering a profit maximizer should be looking to extract maximum synergies regardless of market conditions.
i just meant they can still get by with deals, but you are right...the best for M&A would be in a bull market.
when the bear market does hit - how much do you think IBD will be affected? how much of a hiring freeze?
My BB hired 15 in 2002 for IBD and capital markets (ECM and DCM) combined. Last year, we hired 150+.
"Living the dream 24/7 on http://theallnighter.blogspot.com"
I think it's a bit of both, consolidation in a recession does happen, but it's massively outweighed by companies in a bull market who have good credit with cash flow to pull the synergies they always wanted.
I feel worst for the young guys (and girls) who are starting out right now in sponsors and LevFin. They must be shitting themselves.
*Dude, You and I are both 21 - We're in the same age bracket as the "Young Guys" you are speaking of - Therefore, as I see it, where all in the same boat.
Maybe I missed the point, but your post seemed out of place.
-GateBreaker
In the bear market, all those guys business cards that say "M&A" get stuffed in the bottom drawer and replaced by business cards that say "Restructuring"
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