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I-Banking Salary. Beat to death, I know.

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dominion

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19 Jun 2008, 20:50

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Hi group,

I've done some searches and have yet to find anyone conclusively discussing I-Banking salaries post grad. Lets assume you're hired out of a UE school.

What is the expected salary from a bulge bracket:

1. 1st year associate
2. 2 years...
3. 4 years... VP?
4. ... ?

I'd like to reiterate that this forum is amazing -- I genuinely feel I'll receive actual #s versus speculative media numbers.

Thanks,

D

dabots

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19 Jun 2008, 21:08

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varies very much based on market conditions. when things are good:

89nk

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19 Jun 2008, 21:52

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I seen that figure before posted around, but OP, you could also look at the individual school employment stats, and create an excel spreadsheet to do a salary comparison using just the IB figures.

pelihu

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19 Jun 2008, 22:14

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89nk

I seen that figure before posted around, but OP, you could also look at the individual school employment stats, and create an excel spreadsheet to do a salary comparison using just the IB figures.

No, that wouldn't really work. All of the school stats I've seen publish only guaranteed compensation numbers. So for banking, that's going to be in the neighborhood of $130k or something like that. Of course, more than any of the other big MBA employers, bank compensation depends on bonus numbers. These are not guaranteed bonuses, so they are not included in the stats published by schools. When things are going well, you'll see compensation levels as reflected in the table. When the economy is in the crapper, bankers will make roughly what consultants do, with a year-end bonus of 30-50k rather than 180-250k.

So, here's what you can look forward to as a banker. As a summer associate, you'll be paid at the same rate as a 1st year associate, currently $95k per year (although some banks treat their summers as hourly, and I've heard of summer compensation in the range of $50-60k for 10 weeks). At the end of the summer, if you don't screw up, you'll get a bonus of about $10k. If you sign an offer, you'll get a signing bonus of about $40-50k (that was last year, can only guess at this year). Then, you go back to school, and start working full-time the following July or so. At the end of the calendar year, you'll get paid a "stub bonus". Last year, this was about $50k or something like that. So, for your first six months of employment, you get $40k signing bonus + $47k salary + $50k stub bonus, or about $140-150k total.

This brings you to the start of your first full year. In your first full year you will make $95k salary + $170-$250k bonus for a total of about $265-$345k. This is the approximate figure shown in the chart for first year compensation. Folks at bulge-bracket banks were compensated in this range; folks at smaller banks made as little as $250k in the year shown. If the economy sucks, you might get fired right before bonuses are paid (banks say they lay off people in the bottom 10% or quartile or whatever, but who knows).

So, them's the facts. When the economy is good, an average first year associate at a bulge bracket bank can expect to make about $280-300k. Some banks are more profitable than others, some banks have a deserved reputation for paying top of the market compensation. Generally, the traditional investment banks have always paid more than the universal supermarket-type banks; but when the economy crashes the universal banks should be safer (not so much in the case of Citi).

89nk

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19 Jun 2008, 22:30

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pelihu

89nk

I seen that figure before posted around, but OP, you could also look at the individual school employment stats, and create an excel spreadsheet to do a salary comparison using just the IB figures.

Your post are always informative and high quality stuff. The breakdown of the salary and year end bonus, are they performance based on the bank or individuals? For instance, would one associate get a larger bonus do to better performance or are bonuses paid evenly among years? Also, how is your summer internship going pelihu, if you don't mind me asking? And how are things looking in the IB field currently in terms of job prospects?

pelihu

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19 Jun 2008, 23:59

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89nk

That's an interesting question. Traditionally, banks divide up their associate classes into buckets; i.e. top bucket, middle bucket, bottom bucket. It used to be that a very large portion of associates wound up in the middle bucket, while maybe 10% were in the top, and 5-10% were in the bottom. Some firms (Goldman is one) have a policy where they fire the bottom 5% or something like that each year. There was sometimes little difference in compensation levels for even people in the top bucket.

More recently, firms have been trying to separate associates out further. So perhaps 50% fall into the middle bucket, and more fall into the upper and lower buckets. At the same time, they have tried to differentiate pay more, so they reward and keep their stars, while reducing compensation for bottom bucket performers.

So, getting back to your original question, I think the biggest factor is how well the bank does. If the bank does gangbusters, the bonus pool will be larger. There's more money to go around for top and middle performers; bottom performers will probably be politely encouraged to leave with tiny bonuses. So, a firm that is consistently more profitable will also consistently dole out higher compensation. Firms that are soft, don't make as much money and allow their associates to "have a live" :lol:

will have smaller bonus pools and therefor pay less. Ultimately, I think how a firm does overall has a bigger impact than how well an associate does within their firm.

As far as my summer internship, things are great. I love my firm (I was lucky enough to land at my top choice), I enjoy working with the people in my group and they've gotten me involved right away. That said, it's a tough time to be in banking right now. Some firms cut back on hiring back in the fall, and it's pretty clear that fewer offers will be handed out at the end of the summer. Everyone is a little concerned. Banks will thinning their ranks over the next few quarters, but if the past is any indication, those who survive the bloodletting will do very well. Strangely, banks seem to forget that the economy is cyclical, and they always dump too many people when things are bad, and bid outrageously for talent when things are good. I think that the people who are able to lock in offers this summer will be extremely happy by the time they start their first full years (which would be calendar year 2010).

dosa_don

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20 Jun 2008, 04:41

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Pelihu or natty or rhyme or anyone else- can you throw some light on pay for Equity Research or other IM jobs?

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20 Jun 2008, 07:26

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Top quality insight ... thanks a lot mate.

It will be interesting to see what happens next year though. Also - how will the scene change for non-fin background folks. In boomtime, it seems that as long as you are smart and learn the basics opportunities will be available. But, in the case of slowdown - I wonder whether non-fin folks will even be given opportunities.

As usual time will tell

pelihu

89nk

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21 Jun 2008, 13:14

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Bear Sterns = $0

dominion

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24 Jun 2008, 00:49

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As anyone knows, Pelihu's insight are truly priceless. Thanks for the posts.

dominion

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29 Jun 2008, 18:42

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Pelihu -- roughly how old are you? I remember from our PMs that you were practicing law for sometime before this. I think your transition is incredible.

kidderek

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08 Jul 2008, 07:40

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pelihu

the universal supermarket-type banks

hahaha I've always thought it, but never could quite put the words together to describe these banks. Is this bschool lingo or your own?

jallenmorris

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08 Jul 2008, 07:51

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I wonder for those in the 2011 class (2010 to some extent) if the economy picks back up to even a moderate pace and a recovery (or larger growth if we're not in a recession by the techincal definition), taking place, how will IB handle replacing those jobs that were eliminated with this downturn? It would make sense to me that the bank would want to hire some more new MBAs because we're cheaper than bringing back someone with 3 years experience or whatever.

Any thoughts on this?

pelihu

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08 Jul 2008, 20:38

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kidderek

pelihu

the universal supermarket-type banks

hahaha I've always thought it, but never could quite put the words together to describe these banks. Is this bschool lingo or your own?

I kind of mashed some different terms together. The big former commercial banks (Citi, JP, Bofa, UBS, etc.) are calling themselves universal banks instead of whatever they were calling themselves before. The term supermarket goes way back, I believe to a business strategy by American Express. They bought a bunch of financial assets, including Shearson & Lehman, and announced they wanted to be a financial services supermarket. Didn't really work out too well for them, but Amex and Lehman both prospered (recent events notwithstanding) on their own. Shearson didn't make it. I'm not sure about the model - a key attribute of universal banks is that they are supposed to be able to weather tough market conditions better than their pure-play counterparts. JP has done well, but Citi, UBS Wachovia have suffered because in the good times they had to take on huge risk to compete because of how large they were. Of course, Lehman, Merrill and Bear (RIP) have taken their lumps as well.

Regarding hiring going forward, it's really hard to say what will happen to the class of 2010 or 2011. Remember, Class of 2010 will not start their first full year until 2011, and the class of 2011 not until 2012. That's enough time for a recovery and another bust (hopefully not). For class of 2009 (now summer associates), full-time offers will likely be tougher to come by, but if the past is any indication, people graduating in '08 and '09 will be filling the shoes of the dearly departed (as pretty much every firm has said they are laying of 10-20% of their full-time bankers). If economic recovery becomes really protracted (meaning if things are still in the crapper a year from now) then things could be different.

Realistically, I think that IB internship recruiting will be tough this coming fall. Believe it or not, but those of you headed to business school this year will start meeting with employers in about 2 months (depending on your school schedule, of course). I don't see an economic recovery taking hold in the interim, so it's unlikely firms will be hiring wildly this fall. But as mentioned above, firms know they are hiring for about 3 years out, so no matter how bad things are, they will still be on campus recruiting.

cbreeze

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11 Jul 2008, 21:55

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FWIW, a friend of mine had a summer associate position with BB in IB last year. He had no job offer as of June, a month after graduation from U Chicago. Fortunately, he received an offer with an equity research firm a few weeks ago. We shall see what will happen this fall.

perfectexamscore

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13 Jul 2008, 16:14

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this is so cyclical better to stick to marketing

pelihu

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07 Aug 2008, 00:46

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Cyclical, but even in the crappiest year in memory for banks (I've even heard people comparing 2008 to 1929, but I'm sure that's just grandstanding), bankers will still make as much or more than people going into any of the other popular MBA destinations. The CNN/Money report below seems to think that most bankers will be seeing 15-25% reductions in bonus pay this year compared with last year, although I'm going to stick my neck out and predict cuts more in the neighborhood of 30-40%. If the larger cuts are true, 1st year bankers at the bulge brackets will be taking down something in the neighborhood of $220k this year ($95k base and $125k bonus), down from about $270k the last two years. Keep in mind, the last two years featured the highest IB compensation every, so taking 15% or even 35% off the top still leaves a pretty healthy pile (of cash I mean, not crap).

Top banks continue to dole out cash because they need to retain their best talent. Things could be different at places where banking is not a top priority though. I could imagine that a place like Wachovia might just say screw it, if you people want to leave go ahead, but we're cutting our bonuses down to $50k or something. Places like Lehman, Merrill and even Citi won't do that no matter how much it hurts signing the checks this year. On the flip side, firms that are purely advisory (in other words they never funded any CMBS or CDOs that are stuck on their own books) like Lazard might well be having banner years. I don't know, just speculating. The real impact of a downturn like this is all the people that are let go; but banks will still work to keep those that avoid the axe.

Stick to marketing? Whenever someone says something like that, I always think about that Youtube skit some Chicago students did a while back where they make fun of all the Kellogg students taking jobs as assistant brand managers. That always make me laugh my ass off.

Here's the report:
https://money.cnn.com/2008/08/06/news/ec ... /index.htm

sam77sam7

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07 Aug 2008, 07:34

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Pelihu,

Have a link to that vid by any chance?

~Sam

pelihu

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07 Aug 2008, 09:22

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You know, I don't have a link to the video, but the skit was about how a bus carrying a load of GSB students gets into a fatal accident right before school starts, so they have to scramble to round up a bunch of new students right away. The main part of the skit portrays several different characters that are stereotypical of students that wouldn't normally be admitted there; and ends with an interview with 4 Kellogg students, each of whom has a silly grin on their faces as they tell how they are associate brand managers with different consumer goods companies (I hope I'm not mashing up two separate videos in my head).

I bet Rhyme knows how to find it; I seem to recall him referring to it before and he might have been the person who originally posted it. The link is definitely in some of the older messages here at GMATclub.

vgmat2

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02 Oct 2008, 09:10

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This is a great forum, This is my first post. I have been browsing for a long time, but never bothered to registered. Finally did.
Anyways...What do you guys think about the I-banking salaries now ? and for the newly recruited (?) students...are the terms same as before...

I am currently pursuing MBA and may plan to change my career. It will depend on lot of factors...

Any thoughts...

Thanks