Now that all the big investment banks (JPMorgan, Goldman, Citi, Bank of America and Morgan Stanley) have reported their third quarter results, there's more clarity on the performance of investment bankers working in M&A and debt and equity capital markets.
As the chart below shows, the clarity is not reassuring. Revenues in the investment banking division fell everywhere in the first nine months of 2023. And they fell proportionately more at Goldman Sachs and Morgan Stanley (17% and 18% respectively) than elsewhere.
While investment banking division revenues at the major players are down dramatically, headcount is not. Banks don't break out investment banker headcount specifically, but data released last week by research firm Coalition, suggests investment banker headcount across the industry fell only 4% year-on-year in the first half, which is when many of the cuts at Goldman and Morgan Stanley took place. Even allowing for a few more cuts in the third quarter, front office banker headcount has clearly not fallen to the same extent as fees.
The reason for the discrepancy is clear: banks expect revenues to rebound and don't want to be caught out. "Investment Banking activities are well below 10-year norms. I don't think that will stay that way," said Goldman Sachs CEO David Solomon yesterday. Speaking last week, Citigroup CEO Jane Fraser observed that investment banking downturns typically last no more than seven quarters "because that's often how long it takes for pricing expectations to fully adjust to new realities." We're now seven quarters into the current downturn, said Fraser. The recovery is due.
That doesn't mean the recovery is coming. For all Solomon's ebullience, Goldman also said its investment banking fee backlog is now "lower compared with both the end of the second quarter of 2023 and the end of 2022." Fraser said the market is "fragile"; deals that were expected in Q4 may now move to Q1.
Alastair Borthwick, CFO at Bank of America perhaps put it best. "Investment Banking can come back very, very quickly to a more historical range of $1.3 billion, $1.4 billion, $1.5 billion per quarter," he said yesterday. "-It's just that we've grown tired of predicting when that might be." In third quarter of 2023, BofA's investment banking revenue was....$743m.
For the moment, then, banks are stuck in a bind when it comes to hiring and firing bankers. They have far too many of them for the current size of the market. Despite a few successful IPOs and some better times for debt issuance, the comeback isn't upon us. Given current 'macro headwinds' and geopolitical events, it could be a while. But it will come. "I do believe that the capital markets and banking environment will improve in the coming years," declared Solomon, hopefully.
The outlook for investment banking jobs is therefore cloudy. We're still in a holding position. No one wants to cut to the bone, but no one wants to add headcount either. Expect one in, one out for a while. Unless you're Jefferies, Santander or Deutsche Bank, in which case this does not apply.
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FAQs
The outlook for investment banking jobs is therefore cloudy. We're still in a holding position. No one wants to cut to the bone, but no one wants to add headcount either. Expect one in, one out for a while.
What is the future outlook for investment bankers? ›
How many jobs are available in investment bankers/brokers services? According to the US Bureau of Labor Statistics (BLS), this sector employed 466,900 people in 2021 and is expected to grow by 10% between 2021 and 2031.
What is the outlook for investment banks? ›
We expect an increase in restructuring activity, especially in sectors such as commercial real estate, technology and consumer. Corporates will likely look at smaller deals to gain momentum before considering mega deals. We expect investors to be more vigilant and consider performance before making an investment.
Is investment banking still a good career? ›
Investment bankers are typically the highest-paid workers in the finance industry—high salaries are most prevalent even among younger employees. The starting salary for the typical investment banker exceeds that of most other finance positions, but working in this field has its challenges.
Why is it so hard to get a job in investment banking? ›
Investment banking recruiting is an extremely competitive process, so you'll want to do whatever you can to stand out during the recruitment process. Banks value the quality of your job experience, and the quality of your schools attended, and how hard you network or “hustle” for the role.
Will investment banking be replaced by AI? ›
AI may simplify tasks and improve decision-making, but investment banking relies on human perception and connections. AI may eliminate some jobs but generate others. Thus, a complete replacement is impossible.
What is the prediction for investment banking? ›
According to the Market research reports, the global investment banking industry is a heavyweight, boasting a market size expected to reach a staggering USD 142.16 billion in 2024 .
Who are the top 3 employers in investment banking? ›
Global Investment Banking Companies in India
| Investment Bank Name | Key Services | Year of Establishment |
|---|
| Goldman Sachs | M&A, Capital Markets, Asset Management | 1869 |
| Morgan Stanley | M&A, Capital Markets, Wealth Management | 1935 |
| Bank of America Merrill Lynch | M&A, Capital Markets, Wealth Management | 2009 (merger year) |
7 more rowsJan 2, 2024
Goldman Sachs Research expects several tailwinds to global growth in 2024, including strong real household income growth, a smaller drag from monetary and fiscal tightening, a recovery in manufacturing activity, and an increased willingness of central banks to deliver insurance cuts if growth slows.
What is the outlook for JPMorgan in 2024? ›
In 2024, J.P. Morgan Research estimates 2–3% earnings growth for the S&P 500 and a price target of 4,200.
Banks don't break out investment banker headcount specifically, but data released last week by research firm Coalition, suggests investment banker headcount across the industry fell only 4% year-on-year in the first half, which is when many of the cuts at Goldman and Morgan Stanley took place.
At what age do investment bankers retire? ›
Age Range: It's nearly impossible to reach this level before your early 30's, so we'll say 35-50 for the range. Few MDs continue working until the official retirement age (65-70); it's a stressful, high-pressure job, and past a certain net worth, it's just not worth it.
Is investment banking high stress? ›
Investment banking is a demanding and competitive field that can take a toll on your physical and mental health. Long hours, high pressure, and tight deadlines can cause stress, burnout, and anxiety.
Why are investment bankers so rich? ›
At the heart of an investment banker's earning potential lies their involvement in high-value deals and transactions. These professionals facilitate mergers, acquisitions, and IPOs for corporations, reaping substantial fees in the process.
What are the odds of breaking into investment banking? ›
Across the industry, even at the firms which saw slight year-on-year falls, the norm seems to be that the crude percentage chance of getting accepted to an investment banking graduate program is a bit more than 1%, but significantly less than 2%.
Is it harder to get a job in consulting or investment banking? ›
Overall, I'd say it's more competitive to win a management consulting role at MBB than it is to win an investment banking role at a bulge bracket (BB) or elite boutique (BB) because: There are fewer entry-level roles at the top three consulting firms.
What is the future of the investment banks? ›
The future will likely require that investment banks shed non-core assets and redesign their service delivery around a connected flow model—moving capacity and processes among various geographies and ecosystem partners—and optimize the use of financial technology, data, and analytics to generate differentiated insight ...
Do investment bankers have a good life? ›
In the high-stakes and fast-paced world of finance, the work-life balance of Investment Bankers often teeters on a fine line. Known for their grueling hours and the high-pressure environment of financial markets, Investment Bankers are frequently at the mercy of market fluctuations and client demands.
Is investment banking a growing industry? ›
The Investment Banking market market worldwide is anticipated to witness a significant growth in revenue, with projections indicating a staggering amount of US$0.35tn by the year 2024.
What is the job outlook for a banker? ›
The Bureau of Labor Statistics predicts that the field of banking will grow around 6% between 2018 and 2028, which is about the same rate as the general job market. There is a strong correlation between the general job market and the market for bankers, since bankers are needed to help manage new business growth.
