Bankers Rush to the Exits
by Matthew Karnitsching and Heidi N. Moore
The exodus has begun.
A number of prominent investment bankers are fleeing major Wall Street institutions amid a bracing economic outlook, increased public scrutiny of their pay and mounting turmoil in their own offices.
Wall Street has announced tens of thousands of layoffs since the financial crisis worsened this fall. But most firms have managed to hold on to their top "rainmakers" -- veteran bankers with relationships that brought in revenues for bond deals, mergers and stock offerings.
That has begun to change, as the government's intervention in the financial sector has begun to spell the end of the freewheeling, big-paycheck culture that pervaded the firms.
The past week alone has seen the announcement of several high-profile departures: Jean Manas, head of Americas M&A for Deutsche Bank; Deutsche Bank media banker Fehmi Zeko; Goldman Sachs Group partner Joseph Ravitch; and UBS managing director Jeff Sine. They follow a parade of other senior bankers who have recently left big firms, including Robert Scully at Morgan Stanley, former UBS Vice Chairman Robert Gillespie, and George Ackert, the former head of Merrill Lynch's transportation group.
In London, the exodus of talent has been no less acute than in New York. At Bank of America, for example, where bankers are grappling with both the financial downturn and a tumultuous takeover of Merrill Lynch, a raft of senior Merrill bankers have jumped ship. Many of them, including Mark Aedy, the recently named head of corporate and investment banking for Europe who was close to such blue-chip Merrill investment-banking clients as miner BHP Billiton, have left without another job lined up.
Some of the refugees are seeking to join boutiques firms, such as Evercore, Greenhill or Centerview Partners, while others are getting out of the game altogether.
For some, the motivation to leave is the same one that drew them to Wall Street in the first place: money.
In the past, many of these bankers would have been locked in place with stock options, accumulated after years of toiling from junior analyst to managing director. History is now of little concern as many firms are remade or wiped out by mergers, and stock options are mostly worthless. The market's collapse has also laid bare tensions between traders who generated most of the firms' outsize profits -- and losses -- over the past five years and the advisers who weren't risking firm capital.
"I still believe in the investment-banking business, but it has become a bit of a boat anchor, in that there doesn't seem to be a difference between an advisory banker who generates fees without capital and a [proprietary] trader whose job is like going to the casino every day," said one senior banker who is still constrained by agreements with his former firm.
Adds Alan Johnson of Wall Street compensation-consulting firm Johnson Associates, "At the moment, no one can tell bankers whether they will or won't get paid for the work they do in 2009. It will get worse the longer this goes on."
Bankers at closely held firms have been spared the ire faced by employees of banks that have received public support. But boutiques aren't a total safe haven. Bankers there are paid almost entirely by "eating what they kill," while the larger Wall Street firms have historically offered somewhat lower, but more consistent, pay.
"Deutsche Bank has and will weather the storm better than most, but at this stage in my life the private model is a better opportunity for success," Mr. Zeko said.
Reversing the brain drain could take time. Wall Street firms fired many midlevel bankers in 2001 and 2002, forcing senior bankers to stay longer. As a result, there isn't a big corps of up-and-comers to replace the veterans, many of whom are already wealthy and can easily retire.
At UBS, one banker recently complained that his staff's bonuses were sharply cut after the bank had already set aside money the prior nine months.
Survivors say these actions have poisoned the atmosphere at many banks. "I don't feel like I'm a manager when we ask for all the work and we give them no rewards," said the senior banker who recently decamped.
—Dana Cimilluca contributed to this article.
The exodus has begun.
A number of prominent investment bankers are fleeing major Wall Street institutions amid a bracing economic outlook, increased public scrutiny of their pay and mounting turmoil in their own offices.
Wall Street has announced tens of thousands of layoffs since the financial crisis worsened this fall. But most firms have managed to hold on to their top "rainmakers" -- veteran bankers with relationships that brought in revenues for bond deals, mergers and stock offerings.
That has begun to change, as the government's intervention in the financial sector has begun to spell the end of the freewheeling, big-paycheck culture that pervaded the firms.
The past week alone has seen the announcement of several high-profile departures: Jean Manas, head of Americas M&A for Deutsche Bank; Deutsche Bank media banker Fehmi Zeko; Goldman Sachs Group partner Joseph Ravitch; and UBS managing director Jeff Sine. They follow a parade of other senior bankers who have recently left big firms, including Robert Scully at Morgan Stanley, former UBS Vice Chairman Robert Gillespie, and George Ackert, the former head of Merrill Lynch's transportation group.
In London, the exodus of talent has been no less acute than in New York. At Bank of America, for example, where bankers are grappling with both the financial downturn and a tumultuous takeover of Merrill Lynch, a raft of senior Merrill bankers have jumped ship. Many of them, including Mark Aedy, the recently named head of corporate and investment banking for Europe who was close to such blue-chip Merrill investment-banking clients as miner BHP Billiton, have left without another job lined up.
Some of the refugees are seeking to join boutiques firms, such as Evercore, Greenhill or Centerview Partners, while others are getting out of the game altogether.
For some, the motivation to leave is the same one that drew them to Wall Street in the first place: money.
In the past, many of these bankers would have been locked in place with stock options, accumulated after years of toiling from junior analyst to managing director. History is now of little concern as many firms are remade or wiped out by mergers, and stock options are mostly worthless. The market's collapse has also laid bare tensions between traders who generated most of the firms' outsize profits -- and losses -- over the past five years and the advisers who weren't risking firm capital.
"I still believe in the investment-banking business, but it has become a bit of a boat anchor, in that there doesn't seem to be a difference between an advisory banker who generates fees without capital and a [proprietary] trader whose job is like going to the casino every day," said one senior banker who is still constrained by agreements with his former firm.
Adds Alan Johnson of Wall Street compensation-consulting firm Johnson Associates, "At the moment, no one can tell bankers whether they will or won't get paid for the work they do in 2009. It will get worse the longer this goes on."
Bankers at closely held firms have been spared the ire faced by employees of banks that have received public support. But boutiques aren't a total safe haven. Bankers there are paid almost entirely by "eating what they kill," while the larger Wall Street firms have historically offered somewhat lower, but more consistent, pay.
"Deutsche Bank has and will weather the storm better than most, but at this stage in my life the private model is a better opportunity for success," Mr. Zeko said.
Reversing the brain drain could take time. Wall Street firms fired many midlevel bankers in 2001 and 2002, forcing senior bankers to stay longer. As a result, there isn't a big corps of up-and-comers to replace the veterans, many of whom are already wealthy and can easily retire.
At UBS, one banker recently complained that his staff's bonuses were sharply cut after the bank had already set aside money the prior nine months.
Survivors say these actions have poisoned the atmosphere at many banks. "I don't feel like I'm a manager when we ask for all the work and we give them no rewards," said the senior banker who recently decamped.
—Dana Cimilluca contributed to this article.
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