Investment bankers' extravagant year

Posted by Ed 11 mths ago
Now that we're in the fourth quarter, bonus expectations can be calibrated. If you're working in an investment banking division (IBD) of bank, on M&A or equity capital markets deals, you will probably be calibrating your expectations at a very high level indeed.
Jefferies became the first big(ish) U.S bank to report third quarter results yesterday, and they were very fine. As the blurry chart at the bottom of Jefferies' CEO Rich Handler's Instagram post below makes clear, something special has happened to Jefferies' investment banking revenues in the past 18 months, and the magic doesn't seem to be dissipating.
Jefferies' third quarter runs until the end of August. Its investment banking revenues doubled from a year earlier, with strength across all of ECM, DCM and M&A. Nor is it over yet.
The pipeline for the fourth quarter is also at a record level and Handler and president Brian Friedman said they're confident the good run will continue: "We believe the global economy continues to be in a period of recovery and uptrend, and we therefore expect to see continued robust activity in mergers and acquisitions and capital markets."
Jefferies isn't the only bank feeling the love. The Financial Times reports this morning that fees have exceeded $100bn in the first nine months. In ECM and M&A, they're at their highest levels since records began 20 years ago.
Bonuses will surely be higher. The question is by how much. But before bankers begin browsing for bigger houses or better cars, it's also worth considering the other story of the moment - the end of the SPAC boom.
Financial News yesterday quoted anonymous bankers who think that up to 30% of special purpose acquisition companies will struggle to find anything buy in the next 18 months. Valuations are, "simply too high," said one. “It’s a massive struggle getting funding for the deals, redemptions are very high and people start bemoaning the fact that the SPAC market is in terrible shape.” 

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