Nine reasons to be optimistic about banking jobs in 2025

Times have been tough in investment banking for the last few years. Things, luckily, seem to be on the up – if you believe attendees to Goldman Sachs 2024 US financial services conference, at least.

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Although investment bankers are a notoriously optimistic bunch, there might be some merit to that optimism for next year. Investment banking revenues have shot up in the first nine months of 2024 compared to 2023, with debt and equity capital markets (DCM and ECM, respectively) leading the way.

But what are the main points of optimism in the eyes of bankers themselves? And - most importantly - what does it mean for banking jobs?

1) Financial sponsors are (finally) coming back

What's going on: The return of financial sponsors (private equity firms) activity has been of a king under the mountain for bankers in recent years: always ready to return and restore the kingdom to its rightful glory in its moment of need.

But while private equity has been undergoing some difficult times itself, mostly on account of cripplingly high interest rates, activity does, finally, seem to be coming back. As Goldman Sachs’ CFO, Denis Coleman, said at the conference, “there are not a lot of reasons… Why we can't and shouldn't see more sponsor activity in 2025.”

What it means for jobs: Financial sponsors activity now accounts for around 37% of M&A activity, according to PwC. If and when financial sponsors get back in the ring, M&A dealflow will recover. This should mean that banks will need more M&A bankers. We're already seeing demand for juniors at Goldman Sachs, for instance. 

2) Dealmaking will go back above the ten-year average

What's going on: David Solomon, Goldman’s CEO, loves 10-year averages. And next year will be a big one in the 10-year average community – if such a thing exists – because dealmaking revenue will be above the 10-year average.

As he told the Reuters NEXT conference in New York, “2025 we will certainly be at 10-year averages. We might even be ahead of 10-year average.” That optimism is driven by his belief that the second Trump administration will “run a very, very pro-growth agenda."

What it means for jobs: Banks are mostly still sized in headcount terms for long term deal flows. Earlier this year, market intelligence firm Coalition Greenwich noted that operating margins fell from 34% to 19% across its 12-bank index - basically, banks did not fire as many people as would have been proportional. Therefore, only if fees return to and then exceed the 10 year average will hiring really come back. 

3) IPOs could be coming back 

What's going on: Another big area is in ECM – which will have an outsize impact beyond just underwriter’s fees. Coleman said: “The equity markets are well priced. They are ready to absorb IPOs.” That not only means an uptick in IPOs, but by extension, an uptick in private equity opportunities (IPOs being an excellent way to exit investments) and equities sales opportunities. The return of the financial will also spur IPOs as per point 1.

What it means for jobs: ECM bankers have had a difficult few years, especially in the UK. ECM jobs have been cut in the absence of companies coming to market. As IPOs recover globally, banks may feel inclined to increase origination talent, in particular.

4) Attrition should rise again as people have new jobs to go to

People haven't been moving banking jobs as much as before and attrition has been well below expectations. As optimism returns, people will starting resigning and moving jobs. And as people resign and move jobs, latent replacement hiring will increase. 

5) Private credit is still an attractive prospect even with interest rates down

What's going on: Private credit is the other financial services hero these last few years. A rather niche asset class since its inception in the 80s, there are now around $1.5tn under the umbrella as of January 2024, up from $1tn in 2020.

Morgan Stanley anticipates that it will reach $2.8tn by 2028, but Moelis founder & CEO Ken Moelis told the Goldman conference attendees that the $20tn in “below investment grade credit” has a valid case to move under the private credit umbrella, too. Big horizons for private credit.

Banks are putting their money where their mouth is about private credit, too. Lazard CEO Peter Orszag told Goldman conferences attendees that his firm had vetted “more than three dozen [acquisition] opportunities” to bolt onto the firm, but had “not found the right match yet.”

What it means for jobs: Banks (and other firms such as asset managers) will continue investing in their private credit capabilities. Team moves, such as Nomura-backed Corinthia's acquisition of both of Baring's co-heads of private credit, may become more common. However, talent is likely to cluster in major players - Alcentra, for example, has seen AUM fall since its acquisition by Franklin Templeton, while independent rivals such as Ares have flourished. 

5) AI is unlocking productivity, especially for developers

What's going on: Although Jim Covello at Goldman has been skeptical on AI, the firm's CIO, Marco Argenti, has regularly stated that AI has increased developers' productivity by up to 40%. Coleman said technology does have some “virtuous benefits,” with incremental investment leading to “incremental levels of developer productivity.” More efficient developers means more efficient development means more development.

What it means for jobs: Hypothetically, AI is simply about making existing staff more productive and won't impact hiring. However, increased productivity rarely makes team size bigger. One former Goldman MD said that AI would replace junior coders by 2028, and even Jamie Dimon hinted that AI might "reduce certain job categories or roles."

Dimon's comment might be particularly worrisome - Goldman is working on an AI tool that can “turn text and data collected from thousands of sources into page presentations that mimic the bank’s typeface, logo, styles and charts." That's more or less exactly what an investment banking analyst does - and if it that labor can be replaced, less manhours will be needed by banks. That will lead to less man, not less hours.

6) There is still high demand for financials services professionals

What's going on: One thing that AI won’t be replacing anytime soon is manpower, however. “There remains a very, very significant demand around the world,” for “the most talented people,” Coleman said, while recognizing that they have “lots of opportunities.”

Goldman is focused on its “setup” in making sure that these people are “having the best possible professional experience they can.” And if Goldman is focused on it – why wouldn’t you be?

7) Wealth managers and private bankers will feast on private credit

What's going on: “There’s going to be a greater and greater allocation to private,” Joan Solotar, Blackstone’s head of private wealth solutions, told Bloomberg’s Women, Money, and Power conference earlier this week.

With private credit anticipated to double in size to $4tn by Guggenheim Partners CIO Anne Walsh, and with a potential market of $20tn according to Moelis, the individual beneficiaries will overwhelmingly be the individuals who can connect money to markets.

What it means for jobs: Private bankers and wealth managers will see their teams grow as they accommodate more complicated client needs, and will likely earn greater commissions (and therefore receive bigger bonuses).

8) Banks could wade into crypto as an asset class with friendly regulators

What's going on: Although banks can’t hold cryptocurrencies as principal, as David Solomon reminded Reuters NEXT, the bank does advise clients on them. “For the moment our ability to act in these markets is extremely limited from a regulatory perspective,” he added.

Luckily, the incoming Trump administration might just be the “most pro-crypto president” in US history, if one is to believe Eric Trump, the incoming President’s son. Part of that could very well be allowing banks to hold cryptocurrency for clients.

What it means for jobs: Adding whole new asset classes to investment bank sales & trading teams will see them hiring experts in that field, as well as expanding their student programs to accommodate for those roles.

9) Increased M&A activity could continue to drive banks’ loan activity

What's going on: The last thing that could bring some optimism – and outside of the US, shock and horror – is that an increase in M&A activity will bring opportunities for banks to sell bridge financing.

Bridge financing is offered to institutions engaged in an acquisition (or other type of big activity) to cover capital requirements until long-term debt is secured. Corporations rely on these arrangements to fund acquisitions, and rising M&A volume promise rising bridging loans. That’s good for everyone, but for a European bank fighting in a low-growth environment, it’s a godsend.

What it means for jobs: Banks with a European presence will hire more people to manage the increased deal flow. M&A and DCM teams will probably get most of the benefit here.

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