Investment banking has always been a tough place for young professionals. The industry is once again going through a lean period, but this time it won't be at the expense of young talent, the banks promise.

«I remember that young investment bankers were often regarded as a resource that had to be available at all times,» says Urs Raeber. A veteran of the profession since the 1990s, has been running Deutsche Bank's investment banking business in Switzerland for more than ten years. Compared to back then, he now tells finews.com, the way he deals with the junior staff has changed a lot.

If that is indeed the case, the new rules of the game face a litmus test. Since the outbreak of the Corona crisis, traditional investment banking, which involves advising companies on mergers and acquisitions (M&A), has been a stop-and-start business. In recent months, the lights in the business have turned red.

Lower Fees

It's no coincidence that observers feel reminded of 2020. At that time, hardly anything was going right for investment bankers in the face of the pandemic. The volume of M&A business worldwide fell from just under $4 trillion previously to less than $3.5 trillion, according to data from analysis firm Dealogic. In 2021, the knot loosened, and the pent-up deal pipeline was worked through in record time. Global deal volumes soared to around $6 trillion.

But last year was the end of the line. By November 2022, global M&A deals worth just over $3.4 trillion had been completed, meaning, as a rule of thumb, fees in the capital markets and M&A business in 2022 will have fallen by around 40 percent compared with 2021. This is not without consequences. This January, Goldman Sachs, a heavyweight among Wall Street banks, is expected to cut up to 4,000 jobs, setting the tone for the competition as well.

Another Turnaround

The market situation could change by the middle of the year, according to the latest industry forecasts. Once again, pent-up deals would suddenly be launched, with too few hands ready to handle urgent transactions, particularly among the lower ranks who are in danger of being stretched to their limit.

There was an unprecedented uprising of young bankers at Goldman Sachs in early 2021 because of the workload, with the entire industry soon forced to make concessions. Credit Suisse caused a stir with a «lifestyle bonus» of $20,000 for its young investment bankers.

In the meantime, the structures have also shifted, following Raeber from Deutsche Bank in Switzerland. «The deployment of young staff is now much better planned than it used to be,» he says. There are still weekend assignments, now arranged in advance whenever possible, and the workers are kept informed. «Likewise, we try to reduce idle time in operations and increase visibility for everyone,» Raeber says.

The Crux of the Cycle

That conditions for entry-level workers have improved is also affirmed at the Swiss investment banking arm of JP Morgan. «We introduced our protected weekend policy a few years ago to ensure that our junior investment bankers don't work weekends when they're not involved in pending deals,» says Reinout Boettcher, head of Switzerland there. JP Morgan, like some other banks, has raised wages for junior investment bankers in 2021.

This will be particularly relevant in the coming weeks when the bonus season begins in Swiss banking. The template from the US shows special bonuses are half, on average, compared to last year. This could increase forces at the other institutions. With the announced layoffs, such as at Goldman Sachs, investment banks are not doing themselves any favors over the cycle. Those who lay off too many people during the downturn will miss them when the market recovers.

High Motivation Required

At Deutsche Bank, Raeber is fundamentally optimistic about the next generation. «Investment banking offers top training in many aspects of banking, especially for young entrants,» he explains. Accordingly, there are still enough candidates.

Furthermore, a high willingness to perform is required in the profession. «This is also demanded by our customers and should be reflected not least in careers,» says the investment bank veteran. «Those who apply themselves and deliver good work are regularly promoted.» Those who don't should look elsewhere.