Hi. I'm Aaron Weinman. I want to talk about Wall Street folks' wallets. Investment bankers enjoyed some of their best bonuses early this year, but now they're bracing for lower compensation. Some are getting ahead of that by landing new gigs.
Let's unpack it.
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1. Investment bankers are getting ahead of impending, potential job cuts by locking in their next pay day. A slump in dealmaking also has Wall Street rainmakers bracing for a cut in their compensation as banks look to trim expenses.
"Banks that have key hires for specific positions are still willing to pay a lot," one managing director told Insider. "So where senior folks can lock in pay, they'll move."
Jefferies, for example, hired Chris Roop, the co-head of North American M&A at JPMorgan, Bloomberg reported on Friday. And Insider's latest Banker of the Week, Jenny Lee, recently left JPMorgan to build the private-credit business at alternative-investment firm Brigade Capital Management.
The dearth of deals also means that banks are facing losses for loans their capital-markets teams underwrote earlier this year. At the end of the second quarter, banks marked about $1.3 billion in losses for corporate debt commitments that they have not been able to sell to third-party investors in the bond and loan markets.
It's a sharp U-turn from the beginning of this year, when investment bankers spent their bonuses on luxury goods like Porsches and super yachts. Cheap money and a booming stock market enabled bankers to lift dealmaking across the capital markets to record levels in the last two years, and many were rewarded with handsome pay packets.
Now, investment bankers will be hit the hardest when the next bonus season arrives, according to data from consultancy firm Alan Johnson Associates. Folks in underwriting segments could see bonuses dip between 40% to 45% compared to last year. Individuals who work on advisory services like M&A will likely see their bonus checks shrink between 20% to 25%, the data showed.
"When you have volumes down and banks incurring losses it doesn't make for a good year. We're also seeing unannounced, unofficial hiring freezes at the junior levels," a second senior investment banker said.
Here are some stories about the state of hiring, firing, and the dealmaking freeze across Wall Street:
- Inside Goldman Sachs' intensive performance review process.
- Here's everything we know about Wall Street's belt tightening and how it will impact jobs and compensation.
- Jefferies Chief Executive Rich Handler breaks down everything from layoffs to slowing deals to navigating a "yucky" period in the markets.
In other news:
2. The crypto winter has arrived for Jack Dorsey's company, Block. The payments company reported a dip in overall revenue last quarter, and blamed some of that on crypto and bitcoin's slumping value.
3. Betterment's chief executive is thinking about her next deal and looking beyond its roots. Sarah Levy told Insider that there are small startups in the financial-wellness space that make sense to add.
4. Carlyle CEO Kewsong Lee has stepped down with immediate effect. As per Reuters, the news comes months before the scheduled end of his five-year contract. The firm said Lee mutually agreed his contract would not be renewed, without disclosing their reasons. Co-founder Bill Conway will serve as interim CEO while the search for a new candidate takes place.
5. SoftBank reported a record $23 billion quarterly loss. As per the Wall Street Journal, the Japanese technology investor posted one of its biggest losses at its Vision Fund investment unit, after holdings such as Uber and DoorDash lost value amid the tech downturn.
6. Elon Musk said Twitter played "hide-and-seek" as the billionaire sought information. Musk said in a filing with the US Securities and Exchange Commission that the social-media platform misled its user base to distort its value. Twitter said this was "implausible."
7. Amazon's $1.7 billion purchase of the company behind the Roomba vacuum shows it's leaning into home robots. Amazon's first experiment in the sector, with Astro, was met with mixed reviews. But, as per Bloomberg, the real prize isn't the money from selling iRobot's robotic vacuums, but their ability to map your home.
8. Facebook parent Meta debuted in the corporate-bond market with a $10 billion deal. Despite Meta reporting its first ever drop in revenue last quarter, investors still pumped roughly $30 billion in orders toward the transaction, according to MarketWatch. Bank of America, Barclays, JPMorgan, and Morgan Stanley ran the deal.
9. Startup founders are panicked, but most venture capitalists don't want to hear it. Founders are struggling with their mental health, but many suffer in silence.
10. Popular companies like TikTok's parent ByteDance and Stripe sponsor many H-1B visas for immigrants. Insider has compiled a list of venture-backed startups that sponsor the most H-1B visas.
Done deals:
- Investment firm KKR and Loop Capital Markets, a black-owned investment bank, have formed an alliance where Loop will offer investment-banking and equity research to KKR's equity-capital-markets clients.
- Private investor Ardian and Crédit Agricole Assurances have acquired an indirect stake in INWIT, a European telecommunications tower operator. The investors have bought a 41% stake from telecommunications company TIM.
Curated by Aaron Weinman in New York. Tips? Email [email protected] or tweet @aaronw11. Edited by Hallam Bullock (tweet @hallam_bullock) in London.