If you’re a young person starting in banking now, you might expect to find an industry replete with the wisdom amassed from various financial crises and filled with brilliant battle-worn managers. You could be disappointed. The way a lot of senior bankers tell it, the best people are long gone. All that remain are journey-men going about their business with neither fire nor flair.
“A lot of people who had successful careers – the most talented people of my generation – have left the industry to do other things,” said Kerim Derhalli, the ex-Deutsche MD who himself has exited banking to run Invstr, a social network for amateur investors, when we spoke to him earlier this year. “The people who are hanging on are getting paid less every year as margins and volumes collapse. Their incomes are falling and their lifestyles are having to adjust, but they stay because they’re still getting paid much more than they would doing a comparable job in a different industry.”
It’s a harsh appraisal and one that some say applies more to European than to U.S. banks. At Goldman Sachs, for example, the argument runs slightly differently – there are complaints that the three co-heads of the securities division, Pablo Salame, Isabel Ealet and Ashok Varadhan, became partners long before the financial crisis and should cede to new blood. By comparison, at the European banks which were burned by events in 2008, departing bankers complain that a generation of bureaucrats has taken control.
“European banks today don’t like entrepreneurs,” says a managing director who recently left Credit Suisse’s equities business after a career spanning two decades. “The people in charge are the chief operating officers and the accountants, not the dealmakers and the traders.” He says John Cryan, CEO of Deutsche Bank and a former CFO of UBS, is typical of this new regime: “It’s all about a safe pair of hands. Banks are being run by the people who were historically in the number two positions.”
Years of cost cutting haven’t helped. In their zeal for extracting expenses from the industry banks stand accused of mindlessly hacking the senior ranks. At Credit Suisse, Tim O’Hara, the former head of the markets business and an ex-COO of the fixed income division, allegedly had a policy of ditching 25% of the most senior people and cutting the balance sheet by a similar proportion. “This doesn’t work,” argues the ex-MD. “It makes more sense to keep the productive senior staff and to maximize profits for the growing regulatory cost base.”
To make matters worse, departing bankers argue that today’s junior recruits are less capable than yesterday’s. “When I went into banking [in 2000] my graduate class was comprised of the best students from the best universities in the world,” said Chris Yoshida, the former global head of rates sales at Deutsche Bank who’s now promoting the Kairos Society, an organization that helps young entrepreneurs change the world. “This is no longer the case – the very top students now want to work for Google and Facebook. Banks are attracting the students who are in the top 50% to 75% [instead of the top 25%].”
This might be dismissed as sour grapes from people who’ve left the industry, but Goldman Sachs’ own survey of its 2016 summer intern class suggested intakes have become more pedestrian. Only 3% of Goldman's interns aspired to own luxury items; most wanted to save for a house. The impression was of a group of sensible, hard-working types who were industrious rather than inspired and (arguably) boring rather than brilliant.
We asked our own selection of banking neophytes about their inspiration for joining the industry and their opinions of senior management. Most were unable to cite any admirable bankers as role models (although one mentioned the Zaoui Brothers and another pointed to Jamie Dimon). There was some breathy talk about the “challenge” of working in finance, the expectation of early responsibility and the excitement of doing deals. There was also hard financial pragmatism. “Most people are in this for the money,” says a junior at J.P. Morgan. “Banking’s seen as a high class kind of job. If you can get in, you’re going to stick at it.”
That might be good news. In an industry that’s been prone to losing talented top staff to other more exciting things, it could be helpful if a new more workmanly generation actually sticks around.