Too Many Banking Boutiques?

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Is the bloom off the boutique banking boom already?

A few months ago jumping ship from your bulge bracket firm seemed like a good idea given TARP was an anchor on bonuses. But Goldman Sachs, JPMorgan Chase, and Morgan Stanley aren't going down without a fight and might be paying back TARP money sooner than expected.

Factor in the ever larger number of boutiques fighting over the remaining M&A, trading and restructuring work, and it's clear not everyone is going to survive, points out Breakingviews' Jeffrey Goldfarb:

"Early results are revealing the extent of the struggle. Lazard's non-restructuring-related fees in the first quarter plummeted, creating a shock loss of $54m. Lazard and Rothschild, which commanded 90 percent of the indie-advice dollar in 2002, now account for just 57 percent of it. But their loss doesn't mean everyone else is winning. Evercore managed to increase revenue in the first three months of 2009 and stay in the black - but still suffered a 72 percent decline in net profit.

A true boutique, with a handful of aging partners, can make a nice living by landing a few mandates from longstanding relationships. As the downturn bites, restructuring deals will make up some of the M&A shortfall. But even baking all that into the equation, the fee pie doesn't look big enough to feed all these hungry mouths."

Our take: Get yourself into a niche at a niche firm like KBW in banking, or restructuring in a troubled industry like automotive, retail, housing.

But don't stay forever. Look to make your move back to a firm with a broader range of business ASAP.

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