How shrinking profits helped juniors bankers earn more respect at work
In a weird, ironic way, junior bankers can credit the financial crisis for the fact that they are getting larger base salaries and are being treated better at work, though it’s probably not for the reason that they want.
The crash happened, banks were bailed out, regulators stepped in with strict capital rules and earnings have been marginalized.
“We have substantially reduced the amount of risk they can take. We’ve cut the profitability of banking roughly in half,” former Treasury Secretary Timothy Geithner told the New York Times in a bit of an odd brag (crediting yourself with cutting risk is one thing, but patting yourself on the back for shrinking profits of a vital industry is another, particular considering you now work in private equity).
Anyway, the end result is that bonuses are “normalizing downwards.” Worried about how smaller bonuses will affect their ability to recruit, banks have actually increased base pay – by up to 20% for analysts at tier 1 banks in the U.S. – and have rolled out a number of workplace initiatives aimed at keeping talent happy.
The big headliners were announced almost a year ago. Most banks now have rules that force junior staffers to take full weekends off or have completely banned work on Saturdays. Some other ideas are now trickling in.
Barclays, for instance, is looking into cutting the number of pages in its pitch books for clients from 80 down to 20, according to the Financial Times. It’s even put together a survey that has junior employees nominate senior bankers who are champions of efficiency as well as identify those who are underperformers. The survey results affect the bonuses of senior employees. Deutsche Bank is also said to be reviewing its pitch book process.
Another perk comes from UBS, which has shortened its analyst program by a full year to help limit the amount of tedious work junior employees face early in their career, according to the report.
All in all, it’s a pretty sound strategy for banks. Win the recruiting war with bigger base salaries while limiting the quit rate by not torturing junior bankers (as much). Too bad one of the motivators for the change in strategy was an inability to pay out large bonuses, or at least it appears to be.
“You go and stand by the coffee machine and it can be tough. You don’t know what to say, where to look.”
Just 200 jobs were lost in investment banking in the final six months of 2014. Where is safe and where is shaky?
Like Bank of America, Citigroup cut the pay of its chief executive for 2014 after a number of costly legal settlements. Michael Corbat will earn around $13 million, down roughly 10% from 2013.
Manuel Medina-Mora, head of global consumer banking at Citigroup, will retire in June. Citi didn’t name a successor, which usually means the timing of the departure wasn’t necessarily planned. He will stay on as nonexecutive chairman of Citi’s Mexican unit, Banamex, which has been in all sorts of trouble over the last year.
Elsewhere, Pimco chief economist Paul McCulley is stepping down. McCulley returned to Pimco in May at the request of founder Bill Gross, but we all know how that ended up. And Bluecrest money manager Eugene Gokhvat is leaving the firm.
Meredith Whitney’s biggest investor is now suing her two-year-old hedge fund in New York in an effort to redeem its $46 million stake. All legal issues aside, it’s not a very good look to require your biggest investor to sue you to recoup their stake, particularly when Whitney’s American Revival Fund lost 11% last year.
New bond king Jeffrey Gundlach recently talked about the benefits of hiring a personal driver, telling Bloomberg that he’s been saving “days a week” since enlisting the help of a chauffer in December. Though it could have had something to do with the DUI he got back in September that wasn’t made public until Friday.
Buzz Around the Office
Here’s one fairly simple piece of career advice. If you are on your way to a job interview, don’t curse out the person standing next to you on the subway. That person may end up being the hiring manager.
Quote of the Day: “We have substantially reduced the amount of risk they can take. We’ve cut the profitability of banking roughly in half.” – former Treasury Secretary Timothy Geithner, just to repeat the fact that he actually said this