The 2022 Capital Markets Bankers Survival Guide

There are two rules for forecasting trends in the investment banking industry. First, look at what banks are doing, rather than listening to what they say. And second, in any market, intermediaries tend to know what’s going on sooner than their customers. If you take these rules seriously, it looks like we’ll be spending the second half of this year playing defense rather than attack.

Although senior bankers have, on the whole, continued to talk about their perspectives, there is a clear cooling of the labor market. According to Kevin Mahoney of Bay Street Partners (a headhunting firm), some banks are choosing to “delay ‘non-essential’ or ‘strategic’ hiring plans until the fourth quarter or even 2023”.

Obviously, there’s a lot going on right now, so it’s not entirely inevitable that postponed hires will turn into canceled hires and then layoffs. But that’s how market cycles begin, and the real fear must be that last quarter’s stock market weakness isn’t just about war and uncertainty, but more about expectations of recession and rising interest rates.

As we have noted a few times this year, industry revenues have become very dependent on private equity funds. Indeed, when top bankers give optimistic speeches and interviews, their main data point tends to be the continued strong inflows into private equity, and the presumption that putting that money to work is going to continue to generate fees. In an environment of rising rates and falling expectations, however, financial sponsors could choose to “wait and see” for a while, with particularly dire consequences for ECM franchises.

Which means if you’re in the equity markets, now is the time to start thinking about career survival strategies. It’s probably too late to jump ship for a well-capitalized national champion with a long-term investment plan, but if you happen to be in possession of an offer, the trade-off between money, prestige and job security should certainly be of concern to you.

Otherwise, the key takeaway is that, in order of vulnerability, the people who get fired during an income drought are rainmakers who don’t make rain, victims of office politics, and juniors. without strong relationships. The safest position is if you continue to generate income. If you can’t handle that, you need a strong next-level sponsor who’s willing to treat you like an investment.

Once upon a time, there was a certain security in being so small and unimportant that no one could care to fire you because it wouldn’t save much. Following two years of significant salary increases, however, there are relatively few bankers in this position, including even junior associates. Paradoxically, the expensive doctors hired at the beginning of the year are much safer. These are usually late cycle shots; no one likes to admit a mistake, so the consequences of overhiring are usually not considered until the person responsible for strategy leaves.

Everything could get better, or we could go into 2023 thinking there was worse than being assigned to three contracts at once and working 80 hours a week. Good luck, and remember the words of Andy Gove – “only the paranoid survive”.

Somewhere else, BNP Paribas seemed at times to be one of the more generous banks in terms of allowing remote work. However, they apparently have limitations. When one of their senior mortgage lenders in Lille, in the north of the country, decided she wanted to live on the Mediterranean coast with her family, they hesitated. Apparently, even when Sandrine Sustar volunteered to make the almost 800 km (500 mile) trip to the office once a week, the bank decided that no one else was allowed to work completely at distance and that she would make no exceptions.

Now it has ended in a lawsuit, with Ms Sustar claiming it was unreasonable and she is entitled to €100,000 for constructive dismissal. Anything can happen in a French labor court, but she is currently training to become an interior designer.

Meanwhile…

Compensation officials at Glass Lewis have their sights set on DWS’ Asoka Woehrman, complaining that a significant increase in his base salary (and that of some other directors) is not sufficiently performance-related and is likely to rebase future premiums upwards. Institutional shareholder services are less concerned, although they want more detailed explanations. (Financial News)

Crypto prodigy Sam Bankman-Fried has claimed he would be willing to spend $1 billion on campaign contributions in the upcoming presidential election, which would make him the biggest donor ever. In many ways, the boldest thing about this claim is that a crypto billionaire is planning for two years. (NBC)

Easy come, easy go – MSP Recovery is a company that seeks reimbursements for incorrectly made Medicare payments. It went public in a SPAC deal with a valuation of $21 billion and fell 60% in the first hour of trading. It doesn’t look like a bull market, to be honest. (Bloomberg)

Hire now, fire later – employees of fintech BNPL Klarna have been ordered to work from home all week, to respect the privacy of 700 colleagues who are invited to the office for a “meeting regarding your role at Klarna” . sounds like an understatement for. (Business Intern)

For those interested in WAG banking news, it looks like John Paulson’s divorce is getting “ugly”… (Daily Mail)

…while Diana Jenkins describes herself as “the new villain” of Real Housewives of Beverly Hills (Hollywood life)

Women attended many more virtual conferences during the pandemic, compared to the number of real conferences they had attended before. This seems to be mostly down to cost and travel, though it might have helped in some cases if the actual conferences were less hellish. (WSJ)

Ore Adeyemi, an MD in HSBC’s internal venture capital arm, has moved to the West Coast to set up his own venture capital fund. He takes Tom Bussey and Thomas Caine from the bank with him. (Bloomberg)

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