A Wall Street sign outside the New York Stock Exchange in New York City, New York, US. File photo: REUTERS/CARLO ALLEGRIike formerly high-flying stock markets, the value of investment bankers might be in the middle of a heavy crash. Their work has certainly dried up lately: fees in the industry have been wiped out in the second quarter.
Meanwhile, Rich Handler, the CEO of Jefferies Financial, is on alert for good bankers who might be let go by rivals that “made poor choices in good times”, he told staff members in a memo after the investment bank’s recent results. He also warned them, however, that any underperformers or those not fully committed to Jefferies are always at risk of dismissal.
The other area to truly suffer has been high-risk junk-rated credit, particularly financing for private equity takeovers. Large banks are likely to report heavy losses on buyout loans that they have been unable to sell or have had to offload at hefty discounts. Only Bank of America has put any numbers on this, saying in June that it expected losses of $100m-$150m on so-called hung loan deals in the second quarter.