2008 Investment Banking Analyst Bonuses: I Told You So
Around a month ago when bonus discussions were heating up, I took a different approach from most others and looked at each bank’s…. investment banking revenue.
Based on this analysis, I concluded that bonuses would be down 20-30% overall:
“…But if I had to guess, I’d say that bonuses will be down 20-30% overall. Something in the range of $60-75K for 1st Year Analysts’ top bonus seems reasonable.”
So I don’t see why anyone (at least anyone who read the post) was particularly surprised at the outcome: top bonuses for 1st Year Analysts were indeed in that range.
The Numbers (In Case You’ve Been Hiding Under A Rock)
For those not in banking / those who did not already hear, top 1st Year bonus this year was $65K and top 2nd Year bonus was $85K. Those are down from $90K and $115K last year, respectively.
Below that, “2nd tier” bonuses for 1st years were in the $50-55K range and 3rd tier bonuses fell by another $10-15K.
Beyond that, 4th tier bonuses consisted of being shown the door (or The Conference Room).
I don’t know what specifically each bank paid everyone, and I’m sure there were slight differences in the tiers at different places as well.
But the main point is that bonuses were down 20-30% overall, just as I predicted based on banking revenue.
Why You Shouldn’t Be Disappointed
Over the past week many of the Analysts in my office had been complaining that bonuses were “so low” this year and that they fell off a cliff compared to last year.
Those points may be true, but “only” making $125K (or anything in the six-figure range) is still an absurd amount for a 23 or 24-year old who is just out of college.
I would also point out that back in 2005, top 1st Year bonus was $60K. Even with all the economic problems this year, bonuses were still higher than they were in 2005!
I actually thought bonuses would drop even lower, given how slow dealflow had been over the past year and how little “real work” I had done (one of the reasons I had the time to create this site…).
Why Now Is Actually A Good Time To Enter Banking
I’ve seen some comments that right now is a “bad time” to enter investment banking (or anything in finance) because the market is terrible, bonuses are down 30%+, and people are getting laid off or transferred.
I actually disagree with this and think it’s a good time to enter the field – assuming you can get in.
Markets – whether real estate, the stock market, or the job market – are always best to “buy” into when they’re at their bottom… and that is where we’re at right now (though some argue it could fall even further).
The advantage of getting in now is that a few years from now you can ride the wave at a much higher-level position and take advantage of significantly higher bonuses when the markets recover.
Sure, an Analyst might earn a $90K bonus when times are great (last year) and $65K when things go downhill (this year), but what about VPs and up? The difference there might be in the hundreds of thousands per year.
If you’re just testing the waters and are planning to move onto something else after a few years of banking, then now may not be the best time to enter the field (wait for the boom…).
2009 Outlook
Whenever bonus numbers for a given year are released, the next question on everyone’s minds (aside from how they will spend their new-found cash) is what next year’s bonuses will be.
I certainly don’t think they will be up much, if at all. The most likely scenario is flat to down slightly, though if the bottom really drops out of the economy, bonuses could fall more than “slightly.”
Some Updates / Clarifications
I’ve been receiving a ton of email lately on the site and my plans and just wanted to clarify a few points:
- I was not at Morgan Stanley and am not going to KKR in August – that was just what I wrote as a “sample” boring goodbye email in my last post on farewell emails. Besides, I worked at UBS LA, remember?
- Even though I finished up with banking last week, the site will continue (some readers asked if it was shutting down because of the farewell email post the other day).
- Even though I’m expanding the site and will be offering additional services/products beyond the resume review, the free content will continue as well.
So if you have a question besides those 3 feel free to contact me.
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Tags: investment banker salaries, investment banking, Investment Banking Bonus, investment banking career, understanding investment banking
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Seems like you got that one….
What do you think about 09 SA Hiring outlook (or ‘10 FT)?
Well, fortunately SA hiring won’t be affected nearly as much as FT hiring typically is by economic events/recessions and such. I’d say probably about the same as last year, maybe down a bit.
Hopefully by 2010 things will have recovered, but who knows…
Are you sure on the $65K for top first year?
Some banks paid less, but yes that was the top at JPM, Citi, etc.
If your numbers ($65k for IB) are for first year analysts in NYC then I believe your information is not accurate, and a bit high.
Citi top 1st year bonus was $50K, and was tiered out in 5 buckets. As of Monday of last week JPM analysts IB NYC had not gotten nubers yet.
Note the DATE here: these are 2008 numbers.
2008, as in last year – not this year.
For 2009 numbers, please see some of the latest articles on the side… it was down quite a bit.
Where’s your attention to detail?
Bonus’ paid in June 2009 can reference 2008 (i.e. the firm’s ) reporting period. Most bonuses paid at the beginning of 2009 were “2008″ bonuses.
Ok, well semantics aside these are the numbers for last year. This year’s numbers are in the more recent article.
I’m 27. Can’t stand my current job and have spent the past 6 months swapping stocks (modestly successful). I find it fascinating and nerve-racking.
My question is simple: I’m a computer engineer. I am burnt out on industry, engineering jobs. They are not my products and I am really not an engineer, just a glorified consultant with engineering lingo.
I want to break into banking somehow. I do think that now is the best time to get in. Heck, even with the ‘crappy’ bonuses, I’ll still walk away with more money now.
I sound a little greedy, but I work way to hard on products that are not my own for nothing.
Enough is enough. MBA is a good option, but that puts me back 2-3 years. (more towards 3 due to the logistics of applying, etc).
Suggestions?
Your options are:
1) Networking and targeting smaller firms, preferably tech-focused boutiques.
2) Business school.
To determine whether #1 is feasible, you have to assess how many people you actually know in the industry or related fields.
Hi,
Congratulations for your excellent work.
I am a mechanical engineer with a 4 year working experience in the metals (producer) industry. I’d like to enter the financial sector either in investment research (top like GS) focusing on commodities or project finance focusing on infrustructure/energy projects (again GS calls it merchant banking/private equity).
I am 30 years old, european. Got accepted by a 1-year young MBA in switzerland (near Zurich), whose faculty is top in finance. Still its MBA is too young to be ranked like the top names, i.e Insead, Wharton etc. I have not yet made up my mind to attend.
What advice can you give me, what should be my strategy ? I have no problem starting as an analyst as well. I just worry about my age somehow, the transition seems impossible…
Thanks for your help
Get into a top business school like LSE or Wharton, Harvard, etc. in the US and that will maximize your chances. I would not go to a young MBA program because most firms will not have heard of it. You have no chance of entering as an Analyst, so you need a top MBA in this situation.
thank you
Is Zurich a place to start a career in finance or is it fading away as a financial center ? what sort of banking can one find there ? Geneva for instance is known for private banking…
I have been admitted by the University of St Gallen (CEO’s of Credit Suisse and Deutsche Bank are graduates of this university, but still quite local, so I won’t be impressed if you never heard of it. Swiss people think it is one of the best in the world for finance!)
Other MBA’s: Oxford, Cambridge (UK)
What is your opinion?
Again thank you for your valuable advice
I’m not sure about Zurich – I’ve never even been to Europe before.
I think London is probably a better bet in Europe, though it has definitely suffered a lot lately.
Oxford is probably your best bet if you can get in.
Great info about bonuses, but what is base pay like? I’m not sure I fully understand the pay structure..
Awesome site by the way.
Typically $50-60K for 1st Year Analysts, though it may rise a bit this year to compensate for lower bonuses.