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 banking? ›
Employment of securities, commodities, and financial services sales agents (including investment bankers and investment banking sales agents and traders) is expected to grow by 6 percent from 2016 to 2026, according to the DOL, or about as fast as the average for all careers.
What is the outlook for investment banks? ›
The number of global M&A transactions in 2023 was almost 25% less than in 2022. High levels of dry powder with financial sponsors and the narrowing price gap between buyers and sellers will likely drive M&A transactions in 2024. To remain competitive, companies need to understand and adapt to the changing environment.
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.
Does investment banking have a good future? ›
In this advancing era of globalization, investment banking is growing as a crucial tool for the expansion of industries and supporting the economic growth of numerous sectors around the world. Given that it has a very promising future in India and the rest of the world, it is a fantastic career choice.
What will investment banking look like in 10 years? ›
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 ...
What is the prediction for investment banking? ›
Investment Banking's Market Muscle
This signifies a significant economic footprint, and analysts predict continued growth with a Compound Annual Growth Rate (CAGR) of 8.1% reaching USD 194.05 billion by 2028.
Is investment banking a declining career? ›
Is investment banking dead? The financial world is debating whether investment banking is dead, and the answer is no. Mergers and acquisitions may restart after the epidemic, raising corporate investment, but investment banking personnel will always be needed in the financial business.
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.
What is the highest paid job in investment banking? ›
10 high-paying investment banking jobs
- Portfolio manager. ...
- Investment banker. ...
- Asset manager. ...
- Wealth manager. ...
- Equity trader. ...
- Equity analyst. ...
- Hedge fund analyst. ...
- Foreign exchange trader.
According to a report by Qualtrics, around 97 percent of the researchers concluded Artificial Intelligence will eventually make the role of market analysis, statisticians (95 percent), and analysts (94 percent) become redundant.
What is the outlook for investment banking in 2024? ›
In 2024, the investment banking industry is in the midst of a transformative era marked by continued, rapid technological advancement, fast-changing economic landscapes, and innovative new opportunities related to sustainability, customer engagement, portfolio diversification, and more.
How stressful is investment banking? ›
The Intense Culture. The investment banking industry has long been criticized for its grueling work culture, with junior bankers often feeling pressured to work over 100 hours per week to impress managers and advance their careers.
What is the future of banking in 2030? ›
In the banking landscape of 2030, heightened social consciousness and a focus on environmental, social and governance (ESG) principles will prompt customers to prioritise banks with ethical and sustainable practices.
Is the investment banking industry growing? ›
The study unveils the investment banking market's ascent from $131.25 billion in 2023 to an anticipated $142.16 billion in 2024, marking a substantial compound annual growth rate (CAGR) of 8.3%.
What is the future outlook for investment analyst? ›
The field is also growing at a steady pace. The BLS projects employment for financial and investment analysts to grow by 8% from 2022 to 2032, which is faster than the average projected growth for all jobs. This amounts to about 29,000 new financial analyst jobs by 2032.
What does the future hold for the banking industry? ›
Artificial intelligence will become mainstream in the financial services industry. Even beyond the use of AI to enhance the customer experience, the technology will be applied to analyzing customer behavior to minimize risk, detect fraud and recommend relevant products and services.
