Like Tree10Likes

Investment Banking Analyst Salary

Closed Thread
Page 4 of 20 FirstFirst 1 2 3 4 5 6 7 12 ... LastLast
  1. #31

    Join Date
    Jan 2007
    Location
    Southside
    Posts
    656
    Quote Originally Posted by Beanieskis:
    aussiegal
    No, IBs aren't to blame for that - but banks who lent money to the sub-prime market, in a product that allowed borroweres to simply hand back the keys walk away from their debt if they couldn't afford the repayments, are.
    Banks were directed by the Clinton administration (and supported by Republicans) to lower lending standards.

  2. #32

    Join Date
    Aug 2009
    Posts
    2,711
    Quote Originally Posted by PDLM:
    "Good deal"? It's about 7 times what the average 21 year old fresh grad earns in Hong Kong (if they can find a job at all). What is it going to take to get these Investment Bankers out of their land of make believe and into the real world?
    this discussion went off a complete tangent so let me come back to the issue at hand. 500k is an average salary for an analyst. analyst salaries have not moved much in either direction in recent times, so it's more whether you can get one of the coveted slots or not. GS pays a bit more, ING pays a bit less.

    i think to pay housing allowance is rather seldom these days, so i would be happy about that as an extra benefit.

    to compare an investment banking analyst with any other 21y old grad is comparing apples with oranges. i have seen many such CVs of analysts as I used to partake in recruiting of interns/analysts at a bank, so i can tell you what they typically look like:
    - straight A's on grades
    - speaks at least three languages
    - undergrad at a top school (e.g. wharton for 40k USD/year)
    - several internships with top names during high school and undergrad
    - international project work or volunteer/charity work
    - winners of some business case competitions
    - winners of one or more scholarships for their studies
    - if you were to send them through an IQ test, they would all come out in the top 5% of the peer group.

    i don't think you can compare such a CV with any other grad. and these people command a (hefty top-end) premium, which is why banks pay 500k, etc.

    talking about why investment bankers screwed up is a completely different issue that has nothing to do with how much you pay them as a base salary but more to do with incentive systems and regulatory constraints. i fully support some new measures as some current terms are ridiculous. that's to bring incentives in line with what people should be doing.
    at the same time, further controls and capital constraints are needed to limit the risk that is taken. last but not least, certainly big banks need to be able to go bankrupt hence a scheme where good parts of a bank can survive while bad part are let to die is needed.

  3. #33

    Join Date
    Jun 2004
    Location
    HK
    Posts
    14,624

    huh guys, just wanted to point out one thing:

    Banks are risk adverse.


  4. #34

    Join Date
    Jun 2005
    Location
    Hong Kong
    Posts
    23,205

    If banks are risk adverse then they fucked up their risk analysis quite completely then didn't they? So what happened to the people who did that? Oh yes, they got their bonuses anyway.

    The whole system creating fairytale wealth by repackaging and reselling derivatives round and round in circles (ad infinitum more or less) is utterly, utterly immoral, and no amount of complaining by those of you benefitting from the utter immorality of it is going to convince me otherwise.

    I have no problem with banks who make risky loans to people with bad credit ratings, provided that the people who take that risk suffer the (financial) consequences when those risks go wrong, and I'm quite happy in that case for them to be rewarded if the risk pays off. But to have a system where taking risks only has upside and no downside is just wrong. And, moreover, the whole derivative selling scheme based on it defies all rational analysis - you simply can't create wealth out of thin air as the people doing this claimed to be able to do. A trillion dollars of debt repackaged and resold 100 times is still in aggregate only worth a trillion dollars, not 100 trillion dollars.

    (I use the 1 trillion and 100 trillion figures here losely to illustarte the point - they are not accurate figures)

    But unfortunately, the regulators seem powerless to stop this game. The people running the gambling shop have realised that all they have to do is to take huge hits on their P&Ls for one year (vastly overstating what the actual losses will be), get bailed out by government money (yes that's the taxes that those of us in the real world pay) and then in future years when the 100 trillion dollars of writeoffs have been taken but in fact the result (in aggregate) was only 1 trillion they can all say "oh look - we are so wonderful that we have made 99 trillion of profit this year - let's give ourselves enormous bonuses again".

    It is all totally immoral, and if dozens of these people need to be put in jail for an extended period for the rest of the people in this business to get the message then so be it.


  5. #35

    Join Date
    Jul 2004
    Posts
    1,223
    Quote Originally Posted by PDLM:
    It is all totally immoral, and if dozens of these people need to be put in jail for an extended period for the rest of the people in this business to get the message then so be it.
    Still beating the same old tired drum? Who goes to jail?

    The people who knowingly took out loans they couldn't afford?
    The brokers who arranged the sale?
    The banks who lent the money?
    The banks who repackaged the debt?
    The ratings agencies who certified it?
    The pension fund managers and investors who brought it?

    All are culpable in my view.

    Quote Originally Posted by PDLM:
    And, moreover, the whole derivative selling scheme based on it defies all rational analysis - you simply can't create wealth out of thin air as the people doing this claimed to be able to do. A trillion dollars of debt repackaged and resold 100 times is still in aggregate only worth a trillion dollars, not 100 trillion dollars.
    Now I know you have no idea what you are talking about! You don't think assets are matched by liabilities? Please, go and do a basic accounting course before subjecting us to your ill informed opinions.

  6. #36

    Join Date
    Jun 2005
    Location
    Hong Kong
    Posts
    23,205

    I've done plenty of accounting courses thank you - and I have very successfully run (with P&L responsibility) businesses up to US$150M/year in revenue. That's real world business with real tangible products, not artificial financial constructs. What are your qualifications to comment?

    And yes, all of the above are culpable, but some are more culpable than others.

    The point you seem to be missing, so I'll remake it, is that the banks have assumed a worst case scenario on the vast bulk of these derivatives on the sub-prime loans. So each of them has assumed that they have to write off a large chunk of assets but would still be liable for a larger chunk of liabilities. Now at an individual bank level you may argue that this is just prudent and conservative, but the result is that in total the banking system has written off assets (and hence taken a charge against P&L) that far exceed the maximum possible asset write-off across the whole industry (which must be, approximately, the total values of the sub-prime loans less the value of the assets on which they are secured). The result is that the banking sector in total must in the coming years be in line for some exceptional profits as the assets that they had written off prove to actually have significant value after all. Those artificial profits will of course lead to substantial bonuses for the bankers involved. In other words they've sacrificed much of one year's bonus knowing that in fact the result will be bigger bonuses in future.


  7. #37

    Join Date
    Jun 2004
    Location
    HK
    Posts
    14,624

    [QUOTE=PDLM;463469]
    I have no problem with banks who make risky loans to people with bad credit ratings, provided that the people who take that risk suffer the (financial) consequences when those risks go wrong, and I'm quite happy in that case for them to be rewarded if the risk pays off. But to have a system where taking risks only has upside and no downside is just wrong.


    Ehhrr if I look around me, the few ppl I knew who worked in Equity Derivatives (and more precisely CDO, ABS...) lost their job last year....so yes they take risk and they are handsomely paid when it works...and well when it does not, they get fired....what more do you want? Hang them?


  8. #38

    Join Date
    Jul 2004
    Posts
    1,223
    Quote Originally Posted by PDLM:
    I've done plenty of accounting courses thank you - and I have very successfully run (with P&L responsibility) businesses up to US$150M/year in revenue. That's real world business with real tangible products, not artificial financial constructs. What are your qualifications to comment?
    I see you're still stuck in this mindset that banks are somehow otherworldly and not real. How quaint.

    Quote Originally Posted by PDLM:
    And yes, all of the above are culpable, but some are more culpable than others.
    Four legs good, two legs better?

    Quote Originally Posted by PDLM:

    The point you seem to be missing, so I'll remake it, is that the banks have assumed a worst case scenario on the vast bulk of these derivatives on the sub-prime loans. So each of them has assumed that they have to write off a large chunk of assets but would still be liable for a larger chunk of liabilities. Now at an individual bank level you may argue that this is just prudent and conservative, but the result is that in total the banking system has written off assets (and hence taken a charge against P&L) that far exceed the maximum possible asset write-off across the whole industry (which must be, approximately, the total values of the sub-prime loans less the value of the assets on which they are secured).
    Wll, you're just talking absolute rubbish again. The consensus in the market is that US banks have taken 60% of their writedowns through their P&L, and the European banks only about 40%. If all assets were marked to market, then the majority of banks would be insolvent.

    Completely and utterly the opposite of what you are saying, maybe this is true on PDLM world but back on Earth you're just lying through your teeth.


    Quote Originally Posted by PDLM:
    The result is that the banking sector in total must in the coming years be in line for some exceptional profits as the assets that they had written off prove to actually have significant value after all. Those artificial profits will of course lead to substantial bonuses for the bankers involved. In other words they've sacrificed much of one year's bonus knowing that in fact the result will be bigger bonuses in future.
    Some banks will make exceptional profits, but that will be due to fees for waves of equity issuance as the world de-leverages, and the NIM boost through low interest rates for fundings. These two factors will offset the continuing pain of writing down impaired CDO's and other debt linked to subprime mortgages. Do try to keep up.

  9. #39

    Join Date
    Aug 2009
    Posts
    2,711
    Quote Originally Posted by PDLM:
    So each of them has assumed that they have to write off a large chunk of assets but would still be liable for a larger chunk of liabilities. Now at an individual bank level you may argue that this is just prudent and conservative, but the result is that in total the banking system has written off assets (and hence taken a charge against P&L) that far exceed the maximum possible asset write-off across the whole industry (which must be, approximately, the total values of the sub-prime loans less the value of the assets on which they are secured)
    PDLM you are not correct on this one. As you might know, banks have established synthetic structures that are not linked to a real underlying. This is the same with many other derivatives products where often a multiple of the real underlying is issued (e.g. oil derivatives). Hence the total write off can be larger than the sum of the underlying.

    Now one can argue whether such 'naked' structures are right or wrong, but one thing they certainly do is to increase the liquidity in the market.

  10. #40

    Join Date
    Aug 2009
    Posts
    2,711
    Quote Originally Posted by Mat:
    Ehhrr if I look around me, the few ppl I knew who worked in Equity Derivatives (and more precisely CDO, ABS...) lost their job last year....so yes they take risk and they are handsomely paid when it works...and well when it does not, they get fired....what more do you want? Hang them?
    Mat, the issue is that these people did not get handsomely paid. They got insanely paid. To the point that they can easily survive 2-5 years of unemployment. Their downside is in fact very limited. Their choice in effect is: Make insane money or enjoy the luxury beach resort.

    Their real downside should be: Money insane money or having to sell your house because you cannot afford it anymore.

    That is where I 100% agree with PDLM. The downside is nowhere near the upside. Deferred bonuses, etc. are certainly the way to go.

    The other thing is to pay enough base salary so that a bonus is really a bonus. For example, at Citi the top salaries even for top top top bankers was capped at 200k USD. A lot for many people but not a lot at that level. Imagine one of these guys has 3 kids at top US universities, a apartment in NYC, etc. You cannot have such a lifestyle with 200k USD. If 200k is your base and your bonus is 1 or 2m USD, don't you think you start to rely on that bonus for your lifestyle? Of course one does.

Closed Thread
Page 4 of 20 FirstFirst 1 2 3 4 5 6 7 12 ... LastLast