Once upon a time, big US investment banks were described as 'bulge bracket' and bulge bracket banks were the places to be. 'Bulge bracket' has now fallen by the wayside, but US banks still have a special allure. They pay more than Europeans. They're less constrained by regulation. And like it or not, they're where most aspiring young bankers would prefer to work.
So, what are the differences between the big US houses? Is Goldman Sachs really that distinct from Bank of America Merrill Lynch (BAML)? And is BAML really that differentiated from Citi or J.P Morgan? After all, most big banks exchange staff freely. BAML has plenty of ex-Goldman staff in its markets and investment banking business. And all US banks love to hire outstanding students from elite schools.
Nonetheless, as anyone who's worked for them knows, the big US investment banks come with important distinctions. "Each one of the major US investment banks has a very different culture," says Scott Moeller, a director in the M&A research centre at London's Cass Business School and former investment banker at Morgan Stanley. "Morgan Stanley has traditionally been a very 'white shoe' organisation, for example."
"People at Morgan Stanley take themselves very seriously," says an ex-equity saleswoman who worked for Morgan Stanley, Merrill Lynch and Citi in London and on Wall Street. She adds: "At Goldman they're very full of themselves - there's a joke that goes 'How do you know if someone's a managing director at Goldman Sachs?' - they'll tell you." In her opinion, BAML is more 'fun', Citi more 'down to earth.'
Elsewhere, Thomas Wang, a former quant at J.P. Morgan in Hong Kong and New York City, claims that J.P. Morgan bankers dress less formally than Goldman bankers and that the culture there is less cohesive than at Goldman because JPM is comprised of many different firms (the same can be said of Citi and to a lesser extent of BAML).
Beyond the anecdotes and cultural cliches, what are the real differences between the big US banks, however? Based upon third party reports and rankings by business area, they is what you need to know.
If you want to work for a US investment bank that's incredibly strong across the whole of its 'investment banking division' - meaning across M&A, equity capital markets and debt capital markets, you want t work for J.P. Morgan - or Goldman Sachs. Information provider Dealogic puts these two US banks top of the global revenue charts for 2015 year-to-date, with an equal 8.2% share of global fees. They're followed by Morgan Stanley (6.3%), BAML (6.2%) and Citi (5.4%).
League tables are mutable, however. J.P. Morgan was the clear winner by investment banking fees in 2014, followed by Goldman, BAML, Morgan Stanley and Citi.
J.P. Morgan might be best across the whole of investment banking, but so far in 2015 Goldman Sachs is the best in M&A. Goldman leads the 2015 league table for M&A fees, with a market share of 14.5% compared to 8.5% at J.P. Morgan.
Goldman Sachs was also the world's leading M&A advisor in 2014 (followed by J.P. Morgan, BAML, Morgan Stanley and Citi).
In 2014, J.P. Morgan was also the top global investment bank for FICC sales and trading. Or was it Citi?
In the first chart below, taken from Morgan Stanley's March 2015 'Blue Paper', J.P. Morgan ranks top for FICC sales and trading in 2014. However, in the second chart below, taken from Greenwich Associates fixed income report for the same year, Citi comes first. So, take your pick.
Source: Morgan Stanley
Source: Greenwich Associates
Within the fixed income currencies and commodities segments, however, some US banks are stronger than others. According to Greenwich, Citi is strongest in rates (followed by Goldman) and J.P. Morgan is strongest in credit (followed by Citi and BAML). Citi also came top of the Euromoney foreign exchange ranking for 2014. Data provider Coalition puts Goldman top in global commodities, J.P. Morgan top in securitisation, and Citi top in emerging markets.
While Citi and JPM are top for fixed income sales and trading, neither ranks at the top of the equities sales and trading league. In 2014, Morgan Stanley and Goldman Sachs were by far the biggest banks for global equities sales and trading revenues and this trend continued in 2015.
Within equities, banks were stronger in some areas than others. For 2014, Coalition put J.P. Morgan top for equity derivatives and convertibles, although JPM is weak in cash equities, Goldman Sachs was top for futures and options. Morgan Stanley was top for cash equities and prime services.
Which American investment bank is biggest on its home turf? According to the chart below for 2014 (from Coalition), it's J.P. Morgan - unless you work in equities sales and trading.
Coalition also puts JPM top of the banking league in Europe, the Middle East and Africa (EMEA). Bank of America is the weakest on the continent. Not shown on the table below, it ranks 7th in IBD according to Coalition.
Unsurprisingly, given its 'global footprint', Citi is the US investment bank with the best position in APAC according to Coalition. Again, BAML is left off the table below. It ranked 7th on the continent for IBD in 2014 according to Coalition.
Not all US investment banks break out pay per head in their annual reports. However, Goldman Sachs is widely recognized for its generosity. In 2014, Goldman paid an average of $378k (£245k) per head. In the UK it paid a massive $530k. While Goldman is known for paying generously, Morgan Stanley is better known for frugality - in the last year for which comparable pay data is available, Morgan Stanley's pay was half Goldman's in London.
If Morgan Stanley is parsimonious overall, recruiters in London say the bank is one of the best payers when your career is starting out. “Morgan Stanley are paying associate 1s £100k, associate 2s £112k and associate 3s £122k” ($147k, $165k, and $180k respectively),” a recruiter told us two months ago. “They’re massively ahead of the market,” she added. Those figures are for IBD.
We can't compare how banks pay their senior staff globally (except at executive level), but we can compare how they pay their regulated staff in Europe. In 2013, the last year for which such figures are available, Goldman paid around $5m each to its top staff in Europe, putting it way ahead of the competition.
All banks will work you hard. When the Vault surveyed young bankers, it found complaints about working hours at Goldman Sachs, J.P. Morgan and Citi. "No life outside whatsoever," said one respondent at Citi. “Work-life balance is extremely difficult to achieve given very high expectations,” complained a respondent at Goldman. “Long hours,” complained someone at Morgan Stanley.
Nonetheless, according to a survey of working hours by Wall Street Oasis, Morgan Stanley people work the least.
Source: Wall Street Oasis
Banks are big bureaucratic behemoths. However, some are more bureaucratic than others. Vault respondents complain of an 'overly corporate' and 'stifling' culture at BAML, of 'bureaucracy and institutional inefficiency' at Citi and that, 'the size of the firm can make it difficult to get things done,' at J.P. Morgan. By comparison, Goldman has a reputation for efficiency and collusion, "“People I’ve spoken to who’ve moved from BAML to Goldman have been surprised at how closely people at GS work together,” one headhunter told us.
Any US investment bank will give you great training for the future. However, according to the most recent ranking by Universum, Goldman Sachs' is business students' favourite. Goldman looks like a rational choice: a study by Wharton Business School and McGill University found that if you spend the first five years of your career at Goldman Sachs you may be paid less than others to begin with, but will earn 15% more than the rest by the time you're a vice president (VP).