From the monthly archives:

February 2010

Investment banking firms that shed jobs in a hurry last year, and lost scores of others to high-level defections, are now finding they have to “up the ante” to fill the gaps in their ranks.

That’s the word from BusinessWeek who report that both Bank of America Corp. and UBS AG are doubling base salaries to lure bankers from competitors. UBS, for example, is offering managing directors base pay as high as 300,000 pounds ($470,000), double the amount of last May.

Many firms lost senior talent when the government slapped restrictions on compensation for firms receiving bail-out funds. But both UBS and Merrill Lynch have paid back their government loans and are now free to set compensation as they see fit.

The article quotes John Purcell, managing director of London- based executive search firm Purcell & Co. as saying, “In the world of investment banking, it’s a simple case of who pays wins. Institutions that are fairly directly under political control are facing significant difficulties retaining staff.”

Of course, many banks are raising salaries while cutting back on bonuses in order to placate the public backlash against banker’s compensation. Bonuses paid by UBS reported dropped 71 percent in 2009. Higher salaries are being used to retain top workers who’ve had to deal with pay cuts or freezes over the past 18 months.

Bank of America is reportedly on the hunt to replace three dozen senior investment bankers who quit the firm after its takeover of Merrill Lynch.

UBS is recruiting investment banking job candidates on base pay only, according to Jason Kennedy, CEO of the London-based recruiting firm, Kennedy Associates. “Target candidates … have been ex-UBS employees and other candidates who in the past moved from the bulge-bracket firms to the small broker dealers and now want to move back to the larger firms,” Kennedy said.

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You would think a public backlash against bankers and the threat of tighter government regulations would put a damper on university graduates choosing to study finance. But that’s not the case, according to Andrew Clare at the Cass Business School in London, who noted that applications to study finance are up 60 percent at his school.

Meanwhile, the investment banking  job market is turning around for hiring at the intern and graduate level was well. Even the Royal Bank of Scotland, battered by the financial crisis, is planning to hire 596 new graduates in 2010, more than double the number from last year, reports the Financial Times.

Citi Group is shopping for 330 graduates and interns for its offices in Europe, the Middle East and Africa; that’s up 15 percent. UBS, Bank of American and Merrill Lynch are busying hiring as well.

Mind you, many of the new jobs are geared towards specific lines of business that have been more active in the last year. This includes trading and risk management. In addition, pay structures are shifting in order to pre-empt any regulatory backlash against paying big bonuses. There’s a move toward a greater proportion of compensation being in the form of salary, with bonuses paid in shares and deferred over a number of years.

The influx of younger workers comes at the right time. Changing public sentiment, increasingly regulations and the end of a 20+ year boom in investment banking have many senior bankers questioning whether they want to stay in the industry. Some are choosing to move into less regulated areas, such as hedge funds. Others are leaving the industry altogether, to pursue other career paths.

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Morgan Stanley is planning to boost its securities business by hiring several hundred more traders in the next three years, according to an interview with the new chief executive of the firm, James Gorman, in the Financial Times.

Morgan Stanley’s sales and trading operations fell behind its rivals, Goldman Sachs and JPMorgan Chase last year, pulling in revenues of $5 bn. in fixed income trading, versus $17.6 bn. for JPMorgan Chase and $23.3 bn. for Goldman. Now the firm wants to take better advantage of the boom in fixed income, commodities, currencies and interest rate trades – as opposed to the more complex derivatives that have served it well in the past.

Although Morgan hired 350 people in their securities business last year, Gorman feels the division could grow considerably larger. “We need to seriously grow our footprint in products like currencies, equity derivatives, and commodities. We could easily be 25 per cent bigger than we are,” he said.

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Negotiating for a Better Investment Banking Salary

February 1, 2010

How aggressively should you negotiate the terms of a job offer, especially in a tight job market like this one? It’s a question that leading business schools in the UK and Europe are attempting to answer for their MBA students, in the wake of complaints from on-campus recruiters. Apparently, some of the candidates who received […]

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