How IBs Determine Analyst Bonuses, Quitting vs. Being RIF'd, FREE WEBINAR TODAY - Weekly IB Recruiting Brief

“Don't lie about it. You made a mistake. Admit it and move on. Just don't do it again. Ever” - Anthony Bourdain, Kitchen Confidential

Good Morning,

• Jobs report shows the unemployment rate ticked up to 4.1%, indicating slack in what has been a strong labor market. While July may be too early for a rate cut, a mild inflation report next week could lead to Fed doves who are more worried about labor-market weakness to argue that it is time for the central bank to tee up a September rate cut. (WSJ)
• Corporate bankruptcies are surging, with June notching the highest monthly level since 2020, S&P Global reported. High interest rates, supply chain issues, and deteriorating consumer spending are fueling closures. Through June, year-to-year retail sale volumes fell 1.3% in the past three months. (BI)
• According to a recent article in the FT , investment banking comp remains stubbornly high despite sluggish deal activity. A closer look at the numbers reveals the extent of the disconnect:

Goldman Sachs:

• 2023 efficiency ratio: 74.9% (target: 60%)
• Compensation ratio: 34.5% of revenue
• Average pay per employee: $300,000+

Morgan Stanley:

• Q1 2024 efficiency ratio: 72% (target: 70%)
• Institutional Securities compensation: 40% of revenue

Boutique Advisory Firms:

• Evercore: 67% compensation ratio (Q1 2024)
• Lazard: 69% compensation ratio (2023)
• PJT Partners: 71% compensation ratio (2023)

JPM saw comp expenses rise 6% in Q1 2024 despite a 16% revenue drop.

Industry trends:

• Increased stock-based compensation (e.g., 50%+ for senior bankers)
• AI exploration: JPMorgan investing $15 billion in tech annually
• Selective hiring continues: Citi plans to add 500 bankers over two years

As IPO activity shows signs of life, the industry faces mounting pressure to realign pay with performance. Shareholders watch closely as banks bet on a deal rebound to justify current compensation levels

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RESOURCES

How Investment Banks Determine Analyst Bonuses: A Deep Dive

As Wall Street gears up for its annual bonus season, investment banks are fine-tuning their analyst compensation structures to reward top performers and shape career trajectories. The process, which begins months before year-end payouts, involves a complex system of performance evaluations and forced rankings.

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Quitting vs. Being RIF’d: Which is Better?

The financial sector is experiencing a wave of layoffs, affecting institutions from major banks to small boutiques. As a result, many bankers are weighing whether to resign preemptively or await potential job cuts. Industry experts advise against hasty departures.

READ MORE

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