What's The Future Of Investment Banking

A few days ago, RBS announced to cut 14,000 jobs, mainly in its investment banking division. Last year, Blackstone announced to spin off its financial advisory arm and Barclays announced to cut at least 7,000 jobs as well. And as we all remember, UBS has practically eliminated its investment banking as well.

Do you think this trend will continue with other banks as well? !

Reason I am asking is because I will attend business school this fall and am interested in pursuing a career in IB. However, the number of b-school students pursuing a career in IB seems to be drastically decreasing and banks announcing to practically shut down its investment banking division are not big motivators here. I do not mind working 80 hours a week if there is a decent career path ahead of me, but if it seems to be a dead-end path, I may think twice about going down this road.

As others have said, advisory is alive and well, and I don't foresee that changing in the long-term. That said, advisory will always be a bit of a cyclical business, particularly for certain groups (i.e., M&A). Right now we are at a strong point in the cycle, who knows if the good times will keep rolling in the near-term. But in the long-term if you have the skills / personality suited towards banking [and in particular, thinking towards what is required at the MD level, not the skills required of an analyst/associate], then you can make a very good career out of it financially. In terms of happiness/satisfaction, IDK, that's more up to you.

But right now things are great in terms of hiring, just look at the boutiques, which are your view on pure-play advisory; I don't hear of layoffs at boutiques. However, a caveat is that in terms of compensation and overall "sentiment," I still don't think the industry has recovered to pre-crisis levels. At least at the junior level, I gather that comp from 2007->present has at best been flat in real terms, and considering many costs in NYC rising greater than inflation, my guess is that real comp is down for junior guys. For senior-level, I have no idea, but at BBs, you definitely have much less of your comp in cash than before. And then secondly, I think the "sentiment" of the industry has never really recovered; despite the fact that bankers are doing great in terms of numbers, the pride and euphoria that existed pre-crisis hasn't returned.

A few factors to consider.

1. There's pressure towards large company performing what used to be IB work with in house employees or contractors. It's cheaper for them and they have more control over the outcome of that work. Implications are obvious.

2. The market is somewhat mature at this point and as always the king of the hill changes regularly. Life isn't just the Bulge Bracket, and not all of those Bulge Bracket firms were always IB powerhouses. I can think of a few firms off hand who are moving aggressively and it's entirely possible that other firms won't notice them until it's too late due to their lack of brand name and "prestige". For example the award for the best Aerospace analyst went to a such a firm who I have met some VP/MD level folks at and was extremely impressed by.

And the big one:

1. Here's the biggest elephant in the room: more and more economic analysts and financial forecasters are predicting that the sovereign debt bubble may blow wide open as soon as October this year with the latest estimates I'm seeing at 2020. The warning signs are already here as I'm hearing (via some traders) that sellers of public sector debt can't find any bid offers for those securities forcing them to hold. I'm also seeing liquidity dry up in a massive way on some of my own derivatives trading.

If you think we might see 2008 again it's actually worse. Lookup when the last crash in debt markets was to understand why.

I wouldn't worry about the long term. Someone will always need some banking done, and new entrants will rise to the challenge.