Goldman Taking an Ax to Investment Banking

In addition to the cuts made in trading, Goldman is said to be in the process of culling its investment banking division, from New York to Hong Kong. It’s funny, I was just talking to a friend of mine who does a lot of deals at Citi and he lamented to me about how horrible things were. Not only deal flow was horrible, but the quality of deals and new restrictions are making it impossible to make a living.

The investment-banking cuts represent a reversal from 2015 for a unit that was the top-ranked merger adviser during that near-record year and produced the most profit among Goldman Sachs’s four operating segments. Completed mergers worldwide have plunged more than 80 percent so far this year, while equity offerings have dropped about 65 percent

That 65% drop in offerings is pretty much a 65% pay cut for many guys and gals in investment banking. The bond desks aren’t doing much better. Interestingly, Bank of America is expanding their wealth advisor platform, as a way to grow revenues. Essentially, this is a 180 reversal from what we’ve seen happen at the investment banks over the past 20 years. Instead of eschewing advisors like the plague, due to their limited upside and slow growth business models, banks have no choice but to embrace them now, since the debt and deal departments are scorched earth.