The holidays are usually a happy time for investment bankers. It’s the time when year-end bonuses get doled out, bonuses that can reach 10 to 15 times annual salary. Not so this year, when a stock market crash, credit crunch and economic recession have forced many firms to cut back or eliminate bonuses, and lay off hundreds of staff.
One particular organization has taken a particularly creative and some might say ironic, twist to year-end bonuses. Credit Suisse has announced that it will pay up to 80 percent of its 2008 year-end bonuses in the form of illiquid junk bonds and mortgage-backed securities and corporate loans – the same kind of financial flotsam that has been clogging up the financial system. Instead of paying cash, they’ll pay bonuses “in kind” with securitized paper.
Douglas Rediker, co-director of the Global Strategic Finance Initiative at the New America Foundation, hailed the idea in an article in CNN.com. Not only does it help the bank’s balance sheet to unload this stuff, he says, but it also serves as a poignant reminder to financial professionals to create and sell financial products that have real and lasting value. According to Rediker, you can’t just create these products and then walk away from the wreckage when it all goes bad. You should be willing to invest in it yourself.
Bankers at Credit Suisse are understandably furious. Especially those in unrelated fields such as M&A and research who had nothing to do with CDOs and the like. But for years, the success of structured products pumped up bank profits – and the bonus pool – and no one complained then.
It all sounds like a 2008 version of Charles Dickens’ A Christmas Carol.
Here’s hoping that you and your loved ones have something more satisfying to enjoy this holiday season.
President-elect Barack Obama will introduce a $700+ billion stimulus package early next year designed to create or save 2.5 million U.S. jobs. Aside from the expected boon to construction, infrastructure and clean energy, there are growth opportunities in financial services as well.
Demand should grow for compliance officers, accountants, internal auditors, and financial professionals who can help government regulators, according to a report published by globeinvestor.com New jobs titles may emerge that haven’t even been invented yet. And anyone with legal or financial skills that can be applied to bankruptcy or restructuring will be in demand as well.
Awareness of investment banking activities and vocabulary plays an important role in a successful job search. Investment banking is a complex industry, involving a number of activities ranging from raising funds through debt or equity to making public issue offerings. Bulge bracket firms, such as Goldman Sachs also provide advisory services related to mergers and acquisitions and asset management services to their clients. So, if you are eyeing an investment banking job, you need to be aware of the financial and technical terms used in these jobs.
You should be familiar with terms like Clearing House, American Depositary Receipt, ROCE (return on capital employed) and LIBOR (London Interbank Offered Rate). There are numerous sites, such as Bloomberg and Investopedia, that can help you brush up on your knowledge of investment banking terms.
Deep industry knowledge will always give you an edge. So learn as much as you can about the industry. If you are a specialist in any domain you have an advantage over other candidates. If you have in-depth knowledge about a particular industry and can capitalize on your insight into making investment decisions within that industry, be sure to highlight that in your conversations.
Stay abreast of the current financial events. Awareness of the latest M&A deals being negotiated and the movement of various investment banks in the league table will help you communicate effectively. The Wall Street Journal is an excellent news source and you will benefit by getting into the habit of reading it everyday.
You can read more career advice including Six Places to Start Networking at Investment Banking Jobs Digest.
