It's a good time to be a senior investment banker. It's still a good time to be a junior investment banker, but if you're somewhere inbetween, you might want to watch your back.
Financial News reports today that Bank of America has made a major hire in Europe in the form of Bob Douglas from Deutsche Bank. Douglas, who'd been at Deutsche for nearly two decades, has joined BofA as co-head of retail and consumer investment banking in Europe. Douglas isn't arriving until the summer, meaning he has a period of gardening leave and has been poached. Headhunters say he will have cost BofA "several million" to hire.
BofA isn't the only bank adding senior investment bankers. Citi has been doing the same. Paul Abrahimzadeh, Citi's co-head of equity capital markets for North America recently told Bloomberg that the bank is still hiring MDs (even though revenues from its equity capital markets business were down 78% year-on-year in the first quarter). Accordingly, Citi has hired Gregor Feige from JPMorgan to lead its ECM technology and communications team.
M&A revenues held up better than ECM revenues in the first quarter, but the fear is that they were kept afloat by deals originated last year and could decline over the rest of the year.
In this kind of market, rainmakers are suddenly a lot more sought-after than execution talent. "You need the people to ensure you win the deals that are out there," says one headhunter. "If there are fewer deals, it becomes more of a targeted approach than a volume game."
A managing director who was recently in a bidding war, tells us that the emphasis is now on hiring senior high quality talent. "When everything was going well, the average banker could perform well. But there's now an urgent need to upgrade average players who can't bring in the results." He adds that life is becoming "a bit more interesting" for good senior bankers as banks rush to upgrade.
While strong senior bankers are suddenly being bid away for millions of dollars, it's more expensive vice presidents and directors who look most precarious in a declining market. VPs in London were paid up to £440k last year, and there were rumors of Goldman Sachs VPs in New York earning $1m. Much of this is bonus, but VP salaries have increased and are sufficiently high to make cutting them a tempting route to extracting costs.
"There are a lot of brave faces being put on things by investment bankers, but things could get nasty very quickly if things don't improve," observes one headhunter.
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