December 1, 2023

Investment Banking

Let Your Investment Banking Do The Walking

JPMorgan’s investment bank boss: Deal slump is a chance to find senior talent

The slump in dealmaking is a good time to pick up senior talent, according to JPMorgan’s global co-head of investment banking.

In a wide-ranging interview with Financial News, Viswas Raghavan, co-head of global investment banking at JPMorgan, said banks had moved from not having enough staff to handle the deal boom last year to trimming their ranks again. The Wall Street investment bank aims to keep employee numbers stable during the downturn, he added.

“You need to make sure you have that healthy housekeeping to manage performance appropriately,” he said. “The difference in the past three years, because every bank was so busy, is that this process often hasn’t happened — but many firms seem to be taking a closer look at this now.”

Raghavan said JPMorgan could pick up top bankers. “If anything, this is a good time to attract top people because ultimately this is a people business,” he said. “There is often a flight to quality that benefits firms like JPMorgan whenever things get choppier in the market.”

He added that JPMorgan was unlikely to significantly downsize its business, saying the investment bank “went through the financial crisis without mandating large-scale job reduction programmes”.

READ JPMorgan’s Raghavan: long hours part of life for ‘exceptionally well-compensated’ bankers

“We still aim to be stable in our headcount through good and bad times. A lot of repeat business comes because of the continuity of the team, the same banker, industry expert or product specialist. We always value this continuity through the cycle,” said Raghavan, who is also chief executive of JPMorgan’s business in Europe, the Middle East and Africa.

His comments echo those of Daniel Pinto, chief executive of JPMorgan’s corporate and investment bank, who told a conference in September that banks should be cautious about cutting dealmakers as it makes growth difficult when the market turns.

But banks have nonetheless started cutting staff again as revenue has slumped. JPMorgan’s Wall Street rival Goldman Sachs reintroduced its annual so-called reduction in force in September, cutting around 1-5% of its workforce after stopping the practice during the pandemic. Deutsche Bank has also cut dozens of investment bankers after a slump in fees, while RBC Capital Markets and Berenberg have trimmed their workforces. Morgan Stanley boss James Gorman said the firm was “looking at headcount” after investment banking fees fell more than 50% in the third quarter.

READ JPMorgan’s Daniel Pinto says banks need to be ‘very careful’ about cutting dealmaker jobs

Most recently in Europe, JPMorgan hired 20-year Deutsche Bank veteran Richard Sheppard to co-head its UK investment banking business alongside Charlie Jacobs. JPMorgan has slipped to second place in the UK revenue league tables in the first nine months of this year, but the country remains the largest fee pool in the region.

While UK deal activity has slumped so far in 2022, the tumbling value of sterling against the dollar and political upheaval that has led to three prime ministers in the space of two months means UK Plc remains a target for overseas investors.

“We are likely to see a pick-up in cross-border M&A because of the relative stock market and currency weakness in the UK,” said Raghavan. “There are some gems of British companies who operate globally and have the advantage of being dollar earners with costs in sterling, but perhaps their share price is down because of tough market conditions.”

More broadly, dealmaking remains challenged as rising interest rates and market dislocation have hit activity. Most major investment banks reported revenue declines of more than 50% during the third quarter and after the deal boom of 2021 — when banks brought in $130bn — fees have slipped by 41% to $65.3bn so far this year, according to data provider Dealogic.

READ Inside Citigroup’s Málaga plan to battle banker burnout

Raghavan said there needs to be an adjustment in expectation before deal activity is likely to bounce back.

“We’re evolving from an era of cheap money to one with an increasingly steep yield curve. For a lot of companies, this means there needs to be a mindset adjustment and recalibration around the cost of capital,” he said. “Further, just because your company was worth $5bn 12 months ago, it does not mean it still is in today’s market. A lot of firms need capital and liquidity, but an adjustment needs to happen to match the expectations of buyers and sellers.”

With deal activity down, the burnout crisis that hit the banks’ junior ranks last year and led to an exodus of talent has eased. Analysts and associates, faced with fewer alternative career options in tech and crypto, have instead stuck with banking, FN reported.

JPMorgan has raised junior salaries twice over the past year in line with many of its peers, and reinforced existing restrictions on working hours, which includes a ‘pencils down’ policy on Friday evenings.

However, Raghavan said that juniors should not think of the long hours and pressure in the role as a purely negative phenomenon.

“These are the key formative years and, when I look back to my own analyst days, I just wanted to learn and work on as many deals as possible,” he said. “These skills, learned early on, stick with you. Money, promotion, long hours — a lot of this is a by-product of a job well done. You need to enjoy what you’re doing, to get a buzz from a deal. And if you’re not, you might need to reassess — this industry may not be for you.”

Juniors have complained not just of the brutal working hours, but also of a lack of predictability of when they’re assigned work and senior bankers dropping tasks on them last minute.

“Senior bankers should be better organised with their own prioritisation to make sure juniors are not working unnecessarily,” said Raghavan. “There are areas where we can be smarter and continue to reinforce good behaviours, particularly with weekend work. However, this is a 24/7 job and clients always come first.”

To contact the author of this story with feedback or news, email Paul Clarke