Young bankers face an awful reality check

Golden Grass

I attended a rather grand reception in the City a month ago and there I met a younger salesman from HSBC.

We both did business with similar investors, so got talking over a drink. What struck me was that he was turning 30, the same age I was when I went to work on Wall Street for 10 years.

Maybe I was just trying to re-live my more youthful, successful years, but I found myself being quite excited at this chap’s prospects - large firm, tons of products, good grounding from their graduate programme, plenty of clients. He seemed to have it all going for him.

He was quick to correct my impression, though. 'I’m meant to be doing all this flow stuff with institutional investors, but they use so many electronic platforms that even a big firm like ours struggles to capture the business. I need the occasional ‘elephant trade’ in high yield or emerging markets to keep ahead of budget!'.

'What about all your new deals, and positions, though?', I asked.

'It’s all small pay-outs and the flow business keeps getting squeezed', Clearly another case of the grass being greener.

What we never discussed was the inherent danger of working for a really large institution like HSBC - the larger the firm, the more it takes to keep the lights on. You can have all the bells and whistles you want as an investment bank, but it takes a huge amount of capital.

HSBC boss Stuart Gulliver has been clear that the regulatory environment, and global competition are squeezing margins, and he has to think about shareholders. Just as with UBS, whose shares improved markedly after they pulled back from their global aspirations, HSBC will see its capital value rise now in years to come due to the latest retrenchment.

So the £4billion they’re planning to write off to downsize seems almost like small beer. What my new friend didn't mention, however, was the extent of the Libor and FX scandals, and the continued backlash against investment banks in general, though he did say that big bonuses were a thing of the far-off past.

For young guys in the industry it’s an awful reality check. Do all the right things, study hard, do the intern thing, make it thru the grad programme and finally land the dream front office job - and you could still be staring at premature redundancy after a few years. Along with 8,000 other HSBC staff in London alone. Gawd help you if by then you have a nice pad in London with the requisite huge mortgage. Given the increasingly entrepreneurial skills needed to survive in the City, I reckon the next generation is better off going it alone.

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