2010 Investment Banking Analyst Bonuses: Disappointed?
Bonus announcements were delayed this year as banks waited to see… what every other bank was going to pay.
Forget about the economy, deal activity, or new financial regulations: you can’t be the one bank to pay out $5K less than everyone else.
Despite the late announcements, there was some good news: bonuses were up over 2009 numbers – just barely.
The Disclaimer
I mentioned how banks delayed the announcement of bonus numbers until the end of July this year.
As I write this, some banks have still not announced official numbers – but I’m going to ignore that.
Most bulge bracket banks have already announced, and that’s enough to establish a range for bonuses.
The Cold, Hard Numbers
Here you go:
- 1st Year Top Tier: $50-$65K
- 2nd Year Top Tier: $65-$80K
You’ll notice that these are ranges this year rather than absolute numbers – that’s because different banks paid out different bonuses even for top-tier analysts.
While we saw this last year as well, the range grew wider this year – and sometimes top boutiques paid more than bulge brackets.
Further complicating things were differences in base salaries – specifically, not all banks raised 1st year base salaries from $60K to $70K, so total pay might have been different even if bonuses were the same.
The word is that more analysts were placed in the top tier compared to last year, so more bankers this year actually received the numbers listed above.
If you were not in the top tier, you earned $5-$10K less per tier.
As always, these numbers are in pre-tax US dollars – so if you’re in New York or another heavily taxed region, wave goodbye to over 50% of your bonus.
Our Predictions from a Few Months Ago
To refresh your memory, our predictions from April 2010 were:
- 1st Year Top Tier: $60-$70K
- 2nd Year Top Tier: $80-$90K
The 1st year numbers were close but the predictions were on the high side, while the 2nd year predicted range was around $10K higher than the actual range.
Interestingly, this happened everywhere: most people were predicting higher bonus numbers and were disappointed based on the payouts this year.
After all, the economy was improving, deal activity was picking up, and banks were hiring again – right?
What Happened?
A few things happened in between early 2010 and the summer that resulted in lower-than-expected bonuses:
Europe Went Bankrupt
A few days after the 2010 bonus predictions were published, Greece accepted a bailout package from the EU and just barely avoided bankruptcy.
And several other European countries have been waiting in the bankruptcy wings.
While the debt troubles in Europe did not directly lower banks’ revenues, they did shake everyone’s faith in the “improving economy.”
And since banks copied each other this year more than in the past, that had a ripple effect.
Reform
We covered this one before, but in case you missed it – substantial reform was passed in Europe and the US that will limit bonuses (Europe) and reduce the role of derivatives, prop trading, and private equity and hedge funds within banks (US).
Again, this didn’t impact banks’ revenues directly – but it did play a role in how bonuses were awarded this year.
All regulation carries with it added expenses, and cutting bonuses is the easiest way to free up cash to pay those expenses.
Got Deal Flow?
Most importantly, M&A activity fell in the first half of 2010 and aside from a few large deals, it was relatively quiet – especially in the few months preceding the summer.
Going into the end of 2009 there was more of a rebound expected, but that didn’t happen.
Analyst bonuses are always difficult to predict because you have to look at Q3 and Q4 of the previous year and Q1 and Q2 of the current year, but in this case a weaker-than-expected 2010 definitely reduced pay.
And there’s evidence that the “economic recovery” we have seen has been inflated due to the expected rise in US taxes in 2011.
What’s Next?
So, what about 2011 bonuses? Higher? Lower? The same?
I’ve learned never to make predictions unless you’re very close to the event being predicted – which is why my bonus predictions are released only a few months before bonus announcements.
Still, it’s fun to guess and see how wrong you are, so here’s my prediction:
2011 bonus numbers won’t be much different, but bankers will keep less of their money after taxes.
Why?
- New Regulation – While financial reform was passed in 2010, no one knows how it will be implemented yet – we’ll start seeing the real effects next year.
- Slowdown Next Year – Deal activity may ramp up in the last few months of 2010, but it will slow down in early 2011 due to the new regulations and higher taxes.
- Taxes Are Going Up – Bush’s tax cuts expire in 2011, which means that US income tax and dividend tax rates are both going up. State and city governments will likely raise taxes to repay their deficits, and taxes in other countries will increase for the same reason.
So there you go – deal activity and nominal bonuses won’t be much different, but the new regulations and higher taxes will push down take-home pay.
It’s Not Fair!
But then what is?
You’re still making more than any other recent graduate, and as you move up the ladder the pay only increases.
We may not see 2007 bonuses anytime soon, but banking jobs are still better than almost anything else available to undergraduates.
And hey, if you really want to avoid the higher taxes you can just move to Dubai, Hong Kong, or Saudi Arabia.
Bonus Predictions & Actual Numbers – Other Years
- 2008 Investment Banking Bonus Predictions | Actual Numbers
- 2009 Investment Banking Bonus Predictions | Actual Numbers
- 2010 Investment Banking Bonus Predictions | Actual Numbers
- 2011 Investment Banking Bonus Predictions | Actual Numbers
Break Into Investment Banking
Free Access to Exclusive Content for Members Only!
Sign up for The Banker Blueprint today and enjoy:
- Free Report: 37-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews.
- Exclusive emailed bonus material.
- Free Banker Blueprint newsletter with more in-depth advice.
- Unlimited access to all articles, videos, and advice - and free updates whenever new content is added to the site.
How many tiers are there and how many analysts land in each? ie 3 tiers split 33%-33%-33%?
Usually there are 3 tiers, not sure of the exact split but the majority of analysts fall in the 2nd tier most of the time followed by tier 1 and tier 3. Tier 3 might have been less common than tier 1 this year, but depending on the economy that’s not always true.
I’m trying to raise my GPA to 3.5 (well, highest I can)
If I take all random easy classes like art-history, music, symphony, spanish over econ, finance, do you think it will hurt me when companies ask for my transcript?
Depends on your major… as long as your major is viewed as somewhat difficult (not liberal arts) specific classes don’t matter as much.
Hey I’ve been reading your site for a few months now and never really posted anything, but I do have a specific question.
I came out of Undergrad with a BS in Finance and a 3.0 GPA, and realizing that I needed more I opted to take a one year masters in finance that is being offered at my university while I wait for things to “get better.” Can I expect an advantage in the job hunt for an IB analyst job that will be significant enough to put me over the edge of target school undergrads? All this is sadly without any real IB internships, only one working for a political campaign. Also should I apply for summer internships after I graduate or will they expect me to go for a full-time position?
Thanks in advance!
Masters programs only help if they’re from well-known schools or they significantly boost your GPA. Applying for summer internships after you graduate rarely works because they expect you to come in full-time at that point
Thanks for the reply. My main purpose was to have a clean slate with which to get a boosted GPA, something closer to 4.0. I guess now I will seek full-time offers from Banks after I graduate.
So if I goto a non-target for my MS, bulge brackets will not even consider me? Would I need to attend a target MS program?
It’s the same as undergrad or business school: you can get in from lesser-known places with a lot of networking, but if you’re going to pay for tuition and spend 1-2 years on the degree, you might as well go to a top MS program to maximize your chances.
Yeah,
I too graduated from an average state school. I gained two BB PWM internships. I finnished school close to 3 years ago, worked at a botique asset management firm in the back office, but have been out of work for the last year and a half. I just recently was offered work in PWM at a BB, but it’s part-time. Would going to another non-target MS program be even worth the time and commitment. As I would need to wait another year to apply for target programs. But if I goto a non-target, I can start this jan or march. I know networking is key.
I would not bother if it’s a non-target MS program.
Hey, I study in Australia, but currently on exchange in Hong Kong for 1 year and doing an internship with a bank in the institutional property and banking division with GPA of 3.81 (home). Firstly, my grades for study abroad a based on pass/fail basis, and as expected I aimed to just pass. Will banks ask for my Hong Kong transcript (which shows my actual grades) or just my home transcript?
Also, I’ve spoken to a lot of colleauges, and a lot are recommending that I defer for 1 year and go to Beijing to learn Mandarin. Is this a wise move or should I just jump straight in the workforce? Appreciate your time
Learning Mandarin is not worth it unless you can get to the level of a native speaker, e.g. able to easily scan advanced newspaper articles, listen to finance/political news and understand everything 100%.
Banks will probably ask for both your HK and home transcripts if you list the HK program on your CV.
Thanks heaps for your answer – that too is a very good point. What do you think of my chances in HK for IB? Is it a tough market to crack. I only have conversational proficency, but I’d imagine most things are conducted in English. Thanks.
Junior bankers in HK are mostly from mainland China – you can get in without being a native speaker but it’s much harder and most of the non-Mandarin-speaking bankers there are more senior and from the US / Europe.
Got a stupid question for you to answer…
How to clarify front office and back office role? I thought front office was interacting with clients where back office you are in the cubicles crunching numbers, etc…
If so, would something like Personal Banking office be a front office oriented role? And how do you look upon for roles such as that? Personal banking, commercial banking, etc…
Thanks
Front office = working with clients directly and doing work for them. Back office = Setting up computers, making sure bankers comply with regulations, doing paperwork for internal matters. I guess technically personal banking is front office but it’s totally different from investment banking so you can’t really put them in the same category, it’s like saying, “A carrot and lava are the same because they’re both orange.”
I read your post that one doesn’t need Differential Equations to go into Investment Banking, how much Math does one need? Calc I and II? Multi Variable?
I’m a Business Major so I’m afraid it’ll be seen as “easy”
Calculus? Lol, you need to know your addition and subtraction really well, the occasional multiplication, and sometimes you might even get to divide….you seriously don’t need more than high school arithmetic to get through this job, speaking from first-hand experience during an internship. Am a lib arts major with NO quant experience, and still don’t find the job overwhelming.
Read the article again – addition, subtraction… you never use anything beyond basic arithmetic and statistics (mean, median) in investment banking.
I did. So I was worried with “only” having Calculus in the Relevant Coursework category of my Resume. Thanks for your help (and yours too S2)!
Thanks M&I for another great post.
Curious, if I have a nickname I use since my legal name is a bit hard to pronounce, should I include the nickname in my resume at the top or simply insist on using my legal name and leave my nickname out on my resume?
Thanks again
I would use your legal name on your resume to be safe
Mmm I see, thanks.
M&I,
On an unrelated note. Do the hours get any better for analysts as they move from 1st year to 2nd year, or 2nd year to 3rd year?
For instance, is an Associate more likely to give a 1st year Analyst junk work for the weekend than a 2nd year? Moreover, can a 3rd year Analyst tell a 1st year Analyst to do some of their work?
Yes, the hours and improve and both scenarios you mentioned could happen
M&I,
Could tell us more about the bonuses in London/Europe this year? And what did first and second year associate bonuses look like?
There is typically less information on bonuses in Europe so I usually don’t write about them, but usually firms pay the equivalent but in pounds or Euros instead. Associate bonuses are paid at the end of the year or beginning of next year rather than the summer, as are all senior banker bonuses, so no one knows what 2010 numbers are yet.
Got this acquaintance I know from soccer couple years ago, he is a well respected guy but resides in another state.
I just found in worked in a MM before and want to reach out to him to whether he can hook me up with an internship. How should I approach?
Should I just email stating I came across your linkedin profile. I am interested in IB and noticed you have done work at “xx”. Would you have any referrals or contacts I could use to work at xx? etc? Any advice?
Thanks
or should I pretty much ask him how did he like working there, what’s he upto, and some small chat, wait for his reply prior to asking him for contacts? i don’t want to offend him on the first impressions as just using him or something
Yes that sounds fine, just request a 10-minute chat on the phone and then at the end ask about interviews
Great post! Thank you!
Do you have the figures for Associates?
Thank you
William
Associate figures are announced at the end of the year, so no, not yet.
M&I,
I know you get a ton of questions like this just from reading the comments on your articles, and I’m sure you get plenty more e-mails too, but I need to ask anyway.
I’m about to enter my final year at a non-target school for undergrad in the US with a 3.5 GPA, and I spent a year abroad in Hong Kong. I’m doing an internship with a MM in the US right now, but I haven’t got to do any kind of modeling or valuation work. If I took the excel tutorials from Breaking into Wall Street, would that be enough show I know how to model, and combined with my school/GPA/study abroad/internship be enough to get into a higher tier boutique in HK, Taiwan, or Southeast Asia?
Or would it be significantly better to delay my graduation by 1 quarter, still using Breaking into Wall Street to up my knowledge to go for a better summer internship next summer, in one of those places I listed, and then apply for full time positions the next year?
Generally: How much does a better summer internship in the relevant geographical region improve my chances of getting a full-time offer if I have studied in that geographical region but not worked in it?
A better summer internship in HK will improve your chances of working full-time there, but I’m not sure if it’s worth delaying graduation just to do that. I would just apply for full-time positions now because the MM internship should be enough to get you interviews in HK.
Hi M&I
I’m a rising junior at a Target/Semi-Target. I recently contacted some alumni and I received a response from a VP of a BB asking me to send him my resume in the fall during recruitment.
Now I have a few questions:
What does this mean? Does the VP hold any water during the recruitment process, and does him asking me to send him my resume improve my chances of landing an interview or was that just a polite gesture?
Also, how do I keep in contact with this person? He didn’t say much in the e-mail other than thanking me for reaching out and asking me to send him my resume when recruitment starts up. I don’t want to keep e-mailing him and seem very clingy and coffee meets are out of the question as we live in different states.
Thank you, I love the blog and I read every post.
In all likelihood 1 person claiming to send your resume along will do nothing. You need to follow-up, make sure he’s actually sent it, and get to know other people there. See all the articles and case studies on Networking under Recruiting at the top of the page….
Hey M&I, great site!
Wanted to get the fundamentals of breaking into the ib industry. Apart from the technical aspects, and the relevant experience and high grades… for current events, what do you suggest as to what to keep up with for current events?
Would just following the Dealbook on NY times enough? Which sites do you recommend to stay on time? Can you make an article about good sites to keep up to date?
Also… I’ve read your Interview Guidebook, but just got basic questions… do you have like YOUR definitions of what is a DCF? What is a Credit Default Swap? Beta? Difference between Debt and equity? I mean… stuff like all financiers should know and can learn?
I know that one can look it up online, but it’d be just easier in your language since you put it so nicely for the non-business majors. Would you have an article on that or a sections that would be coming soon for the future?
Thanks
Dealbook and the WSJ Deal Blog should be enough. I’m not sure that I understand your 2nd question – a DCF is a DCF. I don’t have “my” own definition of it because it’s the same as everyone else’s.
What types of hedge funds and PE shops do lev fin guys go to?
Usually debt or bond investing / sometimes distressed debt and so on
I’m a second year student at a non-target. I only made a 2.62 my first semester due to huge family issues (no I’m not making this up) so if I did extremely well my second year (ECs 4.0 both semesters) would I be able to transfer to a target Ivy?
Not sure on that one – I don’t know what the transfer requirements for schools are, may want to ask on college confidential
Hey M&I,
Thanks for this update on bonuses for this year. I am moving hopefully to M&A soon in the Middle East and as a point of comparison (and in order to negotiate my offer) I would like to know more about the BASE salaries @ analyst levels (Analyst 1,2 and 3).
Can you give me some insights about the salary range? I understand that base salaries went up but I have no idea on where they stand now on Year 2 AD (After Disaster)
Thanks
Usually 1st year analysts are $70K, 2nd year are $80K, 3rd year are $90K and Associates are $100K, maybe a little more.
Hi M&I
I don’t have any proven experience after graduation.
I tried to run my own business for last 3yrs but it wasn’t successful.
For changing my creer to I-banker, I studied and passed AICPA and CFA level 1 exams but it is not easy to get even an internship. Maybe due to my low GPA, 3.0/4.5, and a lack of working experience.
What is my best option to get though this horrible situation..
Try to do an unpaid internship at a boutique and then go to business school to re-position yourself
Hi,
I am wondering what the difference would be in terms of bonuses for an analyst in DCM Hong Kong?
Thanks
Bonuses are standardized across different divisions at the analyst level, so not much. You should not be making decisions based on bonus differences at the analyst level – that’s like deciding on a restaurant based on the color of its walls rather than the food.
So in that case I can expect a number based on what you have written above as the minimum for next year?
That’s just a prediction – just like predicting the weather, it’s subject to change. You should not expect to earn a certain amount in 1 year, it’s more about the experience at this stage.
How are back office (IT) bonuses calculated? What is the usual range? Any idea for Blackrock Solutions?
Thank you!!
Bonuses are usually much lower for the back office unless it’s a boom economy – not sure of the exact range but maybe $5,000-$10,000 as of 2010.
Is BlackRock Solutions considered back office? I believe they have their own IT and operation department.
If it is, then is Portfolio Management Group the only front office at BlackRock? Is it possible to move from BlackRock Solutions to the Portfolio Management Group? Thanks a lot!
Not sure if it is considered back office. I think it is not that difficult to move from one division to another if you network enough and the skills you gain in one are transferrable to the other
M&I-
Any insight as to what MM Chicago (Blair, Lincoln, Baird, etc) bonuses are looking like this year? Are they in line with the Street or what? Thanks
No idea, I don’t really look at individual firms because there is a very small difference and because I hate collecting data on all the banks (even more than answering questions on GPAs and the CFA). Predictions will be published in the spring.
I found a listing in my area for a small boutique M&A firm, but the pay is really really low ($36K salary, and after bonuses it says $40K). That’s about a third or so of what I make now. Why I am interested, though, is that they are hiring any major (I don’t have a finance degree) and no experience (I am in finance now, but not ib, and I’m in sales, never had an analyst or even analyst-like position), one of the main duties is the manage interns, its a way for me to get my foot in the door and get some experience in the industry and learn from mentors. However, I am iffy because the role is business development and the pay is so low. I do that now but manage my own accounts and get all the commissions, if I go there I’d be doing entry level prospecting, but I’m coming into a point in my life where I can take that kind of pay cut though just to get my foot in the door, and I do plan to go for an MBA pretty soon and completely rebrand. But my question is do you think it would be worth it spend a year or two there before I go for an MBA, or should I just skip it and go straight for an MBA?
Yes doing that for a year before the MBA would be helpful. http://www.mergersandinquisitions.com/business-school-rebranding/
Have you thought about publishing similar predictions/summaries for associates? I am sure it would be helpful to many MBAs.
Thanks a lot!
I’ve thought about it but usually the WSJ and other publications have decent summaries for more senior bankers; data collection is also my least favorite task ever and these posts are painful to write, so I don’t necessarily want to do more in this area.
When can we expect your predictions for 2011 bonuses? Could you also publish your predictions for third-year analysts? Granted these are probably going to be just straight-lined from 1st and 2nd year’s numbers, but it would still be interesting to see your opinion on this.
Whenever banks finish reporting their 2011 Q1 numbers, maybe the first or 2nd week of May. Projections for 3rd year analysts are just a notch or two higher than those for 1st or 2nd years. Collecting the data for this is one of the most painful and least fun things I do for this business (a close 2nd would be teaching how to adjust for non-recurring charges on comps) so I’d like to cover more but it’s not something I enjoy doing.
How much cash would a 1st year IB analyst get?
How does that compare with a first year trader?
Thanks
http://www.mergersandinquisitions.com/investment-banking-salary/
Any advice for an American student looking to get an internship in Dubai, Hong Kong, etc…
Speak the language and immerse yourself in the culture