Large banks are recognizing the toll that the COVID-19 pandemic and increasingly demanding job requirements have taken upon junior investment bankers by raising their pay.
Goldman Sachs & Co. made headlines earlier this year after a presentation appeared online that included a survey where some junior bankers revealed they work 100-hour-plus weeks from home. Following backlash from the disclosure, the company re-evaluated their pay scale and in early August said that first-year analysts will have their salaries increased to $110,000, while second-year analysts will see their salaries increase to $125,000, according to Business Insider.
Jefferies Financial Group Inc. followed the lead of Goldman Sachs' 30% pay increase, per the Wall Street Journal, while Bank of America Corp. has initiated two rounds of pay increases since April, according to reports from Bloomberg News and Business Insider.
The pandemic fueled the need for banks to offer more competitive salaries, said Logan Naidu, the founder and CEO of Dartmouth Partners, a consultancy firm that has expertise in investment banking compensation.
"What lockdown did, the kind of working in isolation or in your bedroom, meant that people were not enjoying the job as much as they may have done with the normal support structure around them," he said.
In turn, Naidu believes these young bankers realized they did not have to remain in the same job if they did not enjoy it.
"Whereas previously people might have stayed between six to seven years in an industry before looking at x options, that came down and now you've got people leaving as an analyst after one, two, or three years exploring opportunities," he said. "Historically ... to leave banking the pay would have to be so good [otherwise] you'd be taking a hit on your lifestyle. That's no longer the case."
Banks staying competitive
Throughout the summer, more banks have joined the trend in an effort to attract and retain employees. JPMorgan Chase & Co. said it would raise salaries for first-year staff from $85,000 to $100,000, while second-year analysts will receive a $15,000 bump in salary to $105,000, according to Bloomberg News.
Morgan Stanley followed JPMorgan's lead in July by instituting the same pay increase scale, with their first-year analysts having their salary rise to $100,000, while second-year analysts will now make $105,000, per Business Insider.
Citigroup Inc. reported nearly the same pay raises as JPMorgan and Morgan Stanley in July. The company said first-year analyst salaries will increase to $100,000, which represents an estimated increase of at least $15,000, Bloomberg News reported.
Lazard Ltd. also said in early August that they would institute a pay increase for first-year analysts, making the starting salary at least $100,000, with Bank of America also setting that number as the salary for first-year analysts, according to Bloomberg News.
More options for junior bankers
American Bankers Association spokesman Mike Townsend noted in an emailed statement to S&P Global Market Intelligence that while banks are doing their best to attract talent to their companies with competitive compensation and benefits, there are plenty of different fields for young bankers to work in within the industry.
"From software engineering and cybersecurity to marketing and compliance, there are a wide range of career opportunities in banking today," Townsend said.
Naidu also touched on the opportunities that exist for younger bankers outside of the traditional sector.
"You have an increasing number of exit opportunities that actually exist. The natural course going into private equity, adjacent to that you've got people looking at corporates and high credit companies," he said.
Evercore Inc. now serves as the highest-paying investment bank when it comes to first-year banker salaries. The company said in August that first-year bankers will make $120,000, which is an increase from the previous $95,000 salary, Bloomberg News reported.
As for the potential of further salary increases to help retain young talent, Naidu said that this may just be the first round of pay increases. He does not think that the pay for junior bankers will get to the point where they will influence a bank's bottom line though.
"Only if total comp goes up and my suspicion is what we'll see is a rebalancing of base salaries going up but total comp probably not going up as fast. ... Will it affect the bottom line? Long-term, no," Naidu said.
