Investment bankers hit books, road amid tough times
By Jane Merriman, European investment bank correspondent
LONDON, July 31 (Reuters) - Investment bankers are having second thoughts about their high-rolling careers and lifestyle as the worst bear market in 30 years ravages their industry.
With investment banks cutting 60,000 investment banking jobs since the beginning of last year, many have taken redundancy packages and run off to seek pastures new.
"A guy on our team has grown a goatee and gone off to become a photographer," said an investment banker at a U.S. brokerage firm. "It's a bit radical."
"A lot of people have gone travelling and then there are all the dot.gones of course," the banker said, referring to casualties of the Internet crash.
Some out-of-work bankers are trying to get back in, but many want a long-term change.
"Investment banking certainly hasn't got any easier, it's got more competitive and it's certainly become quite a difficult space to be in at the moment," said Simon Fry, who left Japanese investment bank Nomura two years ago to run his own exclusive gym in London's upmarket Chelsea area.
He said 15 years ago very few people left the industry for good, with most coming back when the bull market resumed. "I'm not sure how many people these days go back."
Fry, who was a managing director when he left Nomura after 23 years in the business, said it took time to adjust to life outside banking. He said the biggest adjustment for people leaving the industry was the suddenly slower pace.
"If you lose a job in investment banking at eleven in the morning you kind of think you ought to have your life re-organized by twelve," he said.
TWO-WAY SREET
The bear market has come as a shock to the latest generation of investment bankers, who had come to believe that stock prices only went one way - up.
"They had got used to being 'Masters of the Universe' and then suddenly they weren't," said a banking consultant at an accounting group.
Bankers say the current downturn is far worse than the stock market crash of 1987. "That was very severe, but it was quick. This is different, this has been just one-way traffic for a long time, since March 2000 we've been going one way," said a senior executive at a European investment bank.
Many in the industry have never lived through an extended market decline before and certainly not one as severe as this.
"You literally have to be ancient to have been through this sort of thing before," another banker said. "The mood is generally very subdued, very miserable. I think morale is shot to pieces everwhere."
GOOD TIMES, BAD TIMES
City of London investment bankers, notorious for their fast-lane life-styles, had probably never had it so good in the stock market bonanza of 1999-2000.
Billion dollar mergers or equity issues came so thick and fast they could hardly keep pace. Many were able to negotiate multi-million dollar bonuses guaranteed for three or more years.
"You couldn't even hire junior bankers unless you threw in dry cleaning services or dog walking," said an executive at another U.S. investment bank.
Then the technology bubble burst, stock markets slumped back to 1997 levels and deals all but dried up. The banks, still staffed for the boom, had to slash jobs and with stocks recently hitting their lowest levels in five years, there is a real threat of more cuts to come. M&A bankers have been scrambling for business. Some have even offered their services for free to win mandates or in one case in Germany last year offered backhanders to get a deal.
No one is going to shed too many tears for those now losing their jobs in an industry notorious for excess.
"So much more money has been made that anybody with their head screwed on half straight will have saved something," said another London-based investment banker at a top advisory firm.
Even so, a lot of bankers won't have made quite enough to retire because they've got used to an expensive lifestyle.
"It's almost like the seven wise and foolish virgins," said one analyst at a U.S. brokerage. The ones who have stashed away their riches can afford to get out, she said.
Some who saved wisely are going off to do things they've always wanted to do. "A friend of mine went off to do a doctorate in Bronze Age history," said another broker.
Others who have led the high-life will be facing problems now if they are kicked out on the street and have to find ways to pay their million pound mortgages and childrens' school fees.
LOWER PAY, EXPECTATIONS
And for those lucky enough still to be working, the pay deals may not be quite as juicy.
Banks, desperate to trim bloated cost bases, have tried to scale back guaranteed pay packages, using share options instead of cash and incentives linked to the bank's return on equity.
The industry is realising that the boom times may have been an aberration and it will have to get used to much more mundane levels of business. "All is not going to be glistening as much as before," said another banker.
Some bankers are settling for more mundane jobs. Ironically, one area where area where former traders and sales staff are finding work is in investment bank compliance departments, which make sure the institutions don't run afoul of regulators.
Jeremy Philippi, of headhunters Robert Walters, said the scrutiny on investment banks following accounting scandals such as Enron's (Other OTC:ENRNQ.PK - News) have forced them to keep these departments staffed up, although compliance jobs pay less than trading.
"People on the whole know that it's somewhere where they have to spend money," Philippi said "The options aren't really there for them to decide not to in the current climate." |
