To keep junior investment bankers in line during the Corona crisis, major Swiss banks also dug deep into their pockets. Now there are signs of a course change.
For the «analysts» that are the young water carriers at large investment banks, the summer marks the start of bonus season. In contrast to the temperatures outside their offices, many of them are now threatened with a sobering cold shower. Industry leader JP Morgan has practically halved the bonuses for this cadre of bankers, from up to 100 percent of fixed salaries to a maximum of 60 percent.
As the British portal «Financial News» (behind paywall) reported, Bank of America also ratcheted bonuses downward. Other major houses such as Goldman Sachs, Deutsche Bank, and Swiss banks UBS and Credit Suisse could follow suit.
Throwing Money at the Problem
With the cuts, the industry is reacting to the significantly worse environment in the traditional corporate banking business in mergers and acquisitions and some extent securities trading. The turnaround in interest rates and the markets' reaction to the war in Ukraine have also left deep marks in the half-year results of the investment banks of UBS and Credit Suisse.
Until recently, however, the industry had done quite a bit to keep young bankers happy, particularly given the extreme working conditions during the Corona years of 2020 and 2021 which lead sporadically to downright revolts among the bankers.
Following the example of its American competitors, Credit Suisse even went so far as to pay a one-off "lifestyle bonus" of $20,000 to the more junior investment banking rank-and-file in the spring of last year. UBS also promised special payments and a better work-life balance. At least superficially, a new culture of coddling junior staff was emerging.
Three Months and Gone
Essentially, the extremely tough working conditions for junior investment bankers, have not changed fundamentally. The leading banks have countered the overload primarily with money rather than with reforms. For this, they are now paying another toll. «The last few years have been extremely tough on young bankers» New York headhunter Gary Goldstein recently told finews.com. Just three months after starting work, many rookies threw in the towel and quit, he noted.
There was a real rush out of the investment banks, hedge funds, and private equity firms, he continued. But in the process, he said, the «kids» were harder to replace than might be assumed. Just as they started to train the newly minted bankers, the firms had to start looking again which was not a sustainable situation, he said.
