Assessing job security on Wall Street used to be fairly straight forward pre-crisis. You’d look at a firm’s size, revenue potential and senior leadership, and you’d get a pretty good idea about the viability of the company over the next half-decade or so. It’s not that simple anymore.
As impending rules and regulations polarize markets across continents, the location of a global bank’s headquarters has become more critical, both in terms of job security and compensation potential. We chatted with Chris Apostolou, a former economist who’s now the managing director at London-based Arbitrage Search and Selection, to get some more details on the safest banks to work at today. The short of it: focus your efforts on U.S.-based banks – and bigger isn’t always better.
“The key is assessing bank health is to consider the domestic market. There are banks I would be cautious of. For example, ING is one of the only private hold-outs on Greek sovereign debt – of [roughly] €1bn – and the Netherlands is undergoing a housing market crash. They nationalized a major bank (SNS Reaal) just 5 months ago. And ING cut teams last year which were apparently profitable.
As a general rule Scandi banks, Canadian Banks and mid-size banks from Germany should be OK. Whereas Spanish or Greek banks should be a no go - not just poor money but existential risk as long as the crisis drags on. In fact a bank from any EU country in the euro and in recession is highly risky to at least your bonus and maybe your career.
The exception in Europe is mega banks like BNP Paribas and Deutsche Bank, where bonuses have also been recovering over the last year compared to 2012.
But ultimately the best long-term bet is U.S. banks. The domestic banking system has recovered and the likelihood of mass lay-offs is over. The only word of caution there is that some banks such as Morgan Stanley have used the crisis to depress wages. They target a wage/income ratio of circa 'early 40%' whereas in the better days banks were paying out 65%.
Banks with grand projects are always risky. State Street tried to build a fixed income division from scratch and then 18 months later got rid of [roughly] 100 people even though it appeared to be gaining traction.
I find a lot of people are choosing to take cuts in and earn hard commissions at brokers where no balance sheet is at risk. Many of the best paid these days are at brokers because the advantage banks used to have of using balance sheets to hold inventories of bonds is no longer applicable. Many big banks won't risk balance sheets so brokers are on a level playing field and offer better % payouts, and hard commission structures.
It is rumored Goldman Sachs is looking at moving back to being a registered investment bank again. Proof for sure that the U.S. will once again lead in investment banking.”
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