Morning Coffee: JPMorgan says it's using AI for all these things once done by humans. The attainability (or not) of a Citadel internship
All banks love artificial intelligence (AI) but JPMorgan loves it more than most. Two months ago, the bank said it employed nearly 2,000 AI professionals who were working on 400+ use cases for the technology. The bank's elite AI research team alone comprises 200 people globally, including at its "lab" in London. H1B visa information in the US reveals that seven vice presidents specialized in "predictive science" have been hired on the visas on salaries up to $175k in the last year alone.
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All that investment is delivering results. While JPMorgan had 400 AI use cases in April, CEO Jamie Dimon said last week that it will have "maybe 800" by the end of this year. Dimon didn't say that the new use cases will displace human beings at JPMorgan, and yet when you look at what they entail, this seems semi-inevitable.
"We use it for prospect, marketing, offers, travel, notetaking, idea generation, hedging, equity hedging and the equity trading floors, anticipating when people call in what they're calling it for, answering customer, just on the wholesale side, but answering customer requests," declared Dimon, adding for good measure that AI will "blow people's minds," and is "powerful stuff."
Coincident with Dimon's comments, the Financial Times is reporting that JPMorgan is preparing to release a new generative AI tool called "MoneyBall", which Kristian West, head of investment platform for JPMorgan Asset Management, says will help employees flag questionable decisions like selling potential top investments too soon. West says the tool works off employees behaviour and flags, "how they and the market have behaved in similar circumstances and helps them correct for bias and improve their process.”
The revelations follow a recent New York Times article claiming that Goldman Sachs and Morgan Stanley are contemplating cutting the size of their new analyst classes by two thirds as AI takes over junior banker tasks like building pitchbooks. Goldman Sachs is already said to have a tool that will “turn text and data collected from thousands of sources into page presentations that mimic the bank’s typeface, logo, styles and charts”. Jobs higher up the banking hierarchy may also be threatened. - Reflecting Dimon's comments, Jay Horine, JPMorgan's investment banking co-head, told the NYT that AI can be used to identify clients ready to do a bond offering, for example.
Needless to say, no one is actually talking about job losses as AI's "use cases" proliferate. Instead, the trope is that jobs will become more interesting, that drudgery will disappear and that the humans will become more "efficient." But banks aren't known as indulgent employers, and banks' shareholders like to see returns. For the moment, Dimon said senior managers are only just starting to appreciate AI's potential. When they do, things could change dramatically.
Separately, fewer than 1% of intern applicants are accepted at JPMorgan. 1.27% of graduate applicants are accepted at Goldman Sachs. And only 0.35% of applicants are accepted at Citadel and Citadel Securities.
Business Insider reports that 85,000 people applied for 300 internships at Citadel (the hedge fund) and Citadel Securities (the electronic trading firm) this year. That's up from the 69,000 people that Bloomberg said applied last year, which itself was up from the 42,000 people who applied in 2022. Applications have more than doubled in two years.
The more people who want to work for Citadel, the harder it is to get in. In 2022, 1% of people were accepted. In 2026 that might be down to 0.1%, or less.
Meanwhile...
AI researchers in hedge funds are getting salaries alone of up to $400k. (Business Insider)
Goldman Sachs is exploring paying referral bonuses for investment bankers and traders who send business to its private bank. (Financial Times)
Michael Klein is back with a key rule in the $12bn Aramco share sale. Fees in Saudi Arabia are usually pretty low, though. (Bloomberg)
Bank of America CEO Brian Moynihan expects trading revenue to grow at a low single-digit percentage in the current quarter, with equities' strong performance partially offset by broadly flat revenue in fixed income. Investment banking fees are expected to rise 10% to 15% in the second quarter from a year earlier. (Reuters)
ECM bankers in London are busy with follow-on transactions. They've reached $11.5bn this year, which is the fastest start to the year to late May since the boom year of 2021. However, Initial public offerings in London have only raised about $148mn so far this year across four transactions. (Financial Times)
The Labour Party says Rishi Sunak needs to face questions about his role in the sale of ABN AMRO to RBS when he worked for hedge fund TCI. (Guardian)
Bill Ackman is selling a stake in his hedge fund Pershing Square in a funding round expected to value the firm at around $10.5bn. (WSJ)
Private equity alone is sitting on a record backlog of 28,000 companies worth an estimated $3tn. Annual compensation costs in the industry last year were $25bn. (Financial Times)
How to get a job now: six months, 114 job applications, 22 cover letters, 39 responses, 9 interviews and one (accepted) offer. (Bloomberg)
Referrals are back in fashion as companies are swamped by applicants. (WSJ)
Wall Street Bets was set up by an alcoholic who was then ejected by a new generation of moderators. (Bloomberg)
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