Why overstaffed teams and bad attitudes mean junior banker jobs are at risk

At the height of the 2008 financial crisis, when banks laid off tens of thousands of staff, junior bankers who had only been on the job for a few weeks were among the first to be shown the door.

Years later, banks faced a curious problem: they lacked mid-tier bankers and had to compete with Big Four rivals, law firms and accounting firms to attract talent. So they learned an important lesson: don’t cut the juniors.

But times have changed. Analysts recruited over the past two years now face a difficult chapter of the realities of working in investment banking – soaring inflation and economic headwinds have hit the business, driving down more than 40%. Juniors have borne the brunt of cuts at some banks, with senior dealmakers citing rising wages, overstaffed teams and poor attitudes from some analysts hired over the past year.

The 10 job cuts at RBC Capital Markets in the US in September largely meant reductions in junior ranks; Goldman’s cuts the same month included analysts, according to people familiar with the matter.

Barclays’ elimination of 3% of investment banking staff earlier this month focused on roles from analyst to vice president, sources said Financial News. The 900 frontline jobs Credit Suisse is cutting include analysts, according to people familiar with the matter.

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“Many banks have significantly boosted junior talent in 2021 thanks to record volumes and client activity in investment banking,” said Chris Connors of Wall Street compensation consultants Johnson Associates. “Now that investment banking has fallen dramatically from 2021 levels, it’s a case of ‘wrong place, wrong time’ for juniors.”

For junior bankers, the current threat of layoff is a reversal of fortunes from this time last year. A leaked presentation by a group of Goldman Sachs analysts in March 2021, describing the decline in health caused by brutal 100-hour weeks, sparked a rebellion in the junior ranks.

Gen Z bankers, attracted by opportunities in tech, crypto, and private equity, have exited banking in droves over the past 18 months. Banks have increased starting salaries by more than 40% over this period, with most companies now offering £70,000 before bonuses, up from £50,000 in 2020.

“Wage inflation over the past year has created an unusual situation where juniors now represent a fairly large cost base,” said a leveraged finance manager at a European bank. “If there’s not a lot of activity, it’s no longer viable to have juniors hanging around like good guys to have.”

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These so-called exit options have also evaporated in recent months, as major tech companies such as Amazon, Twitter and Meta have laid off thousands of employees and crypto has plunged into a new crisis with the collapse. of the FTX crypto exchange. The juniors have chosen to stay put, often attempting to return to investment banking, but now face an uncertain future.

“When banks start cutting analysts, partners and vice presidents, it’s a sure sign that they don’t expect things to get better anytime soon,” said Andrew Pringle, Founder of Circle Square Recruiters. “We get incoming calls from people who are nervous about what’s going on in their organization.”

The burnout crisis in the junior ranks has been exacerbated by working conditions during the pandemic. With bankers working from home amid a dealing boom, many were working extreme hours, often with little interaction with colleagues.

It may have sparked a rebellion among analysts and associates, but some senior bankers also said the lack of interaction with colleagues – described as the “learning model” – during the pandemic has left many juniors to lack.

“This has to be one of the worst analyst classes in my 20 years in the industry,” said a debt capital markets executive who requested anonymity. “To make matters worse, they have every right to refuse to work late or refuse to do the right thing for customers.”

Logan Naidu, managing director of recruiters Dartmouth Partners, said much of the analyst-level cuts were “performance-related” and many juniors were often shielded from the latest round of layoffs.

“The majority of cuts tend to come from the vice president and director level,” he said. “Revenue-generating physicians are also relatively isolated right now.”

To contact the author of this story with comments or news, email Paul Clarke

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