Banker pay surge prompts rise of the robot analyst

A man walks into the Morgan Stanley building in New York, April 29, 2009. REUTERS/Brendan McDermid

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LONDON, Dec 30 (Reuters Breakingviews) – Dealmakers are the Luddites of the banking world. Algorithms have conquered trading floors, but departments that underwrite securities and advise on deals are still stuffed with twentysomethings formatting pitchbooks and copying data from annual reports. A pay surge offers new incentives to automate. Prepare for the rise of the robot investment banker.

Bank bosses like JPMorgan’s (JPM.N) Jamie Dimon and David Solomon of Goldman Sachs (GS.N) get it. Both banks have set up teams dedicated to modernising their M&A advisory and capital markets businesses. The problem is that old-school rainmakers often mistrust valuation multiples pulled from live databases. Some also prize the process of making analysts spend hours sweating over seemingly trivial details, as it helps to weed out the less committed. An aversion to technology partly explains why the number of mergers, debt and equity bankers has risen by 2% since 2016 to 19,500, according to Coalition Greenwich, even as the number of humans trading shares and bonds has declined (see chart).

That will change. Record deal volumes and a tight labour market pushed up pay in 2021. First-year analysts at Morgan Stanley (MS.N) will now earn a $100,000 base salary, Reuters reported, a $15,000 rise read more . Rivals worldwide have followed suit. A poll by London-based recruiter Dartmouth Partners found that second-year analysts on average earned a total of almost 120,000 pounds ($160,000), a roughly 20% rise.

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That changes the calculus for tech-averse senior bankers: higher pay for juniors eats into their bonus pot. It’s also harder to justify paying analysts six-figure salaries to perform menial tasks, such as fiddling around with font sizes on PowerPoint presentations.

The logical alternative is to use software that gathers data automatically and pulls it into live pitchbook templates. It could be a stop on the way to a slicker business model. Imagine if companies could issue bonds with the click of a button, or if chief executives could pull up a list of merger targets on a smartphone app.

Senior bankers will defend the status quo, but the sudden ubiquity of video calls shows entrenched habits can change. The bigger question is whether analysts should welcome their robot counterparts. In theory, automation should mean fewer all-nighters and more time for interesting tasks. However, it may knock some of them out of a job.

Reuters Graphics

(This is a Breakingviews prediction for 2022. To see more of our predictions, click here.)

Follow @liamwardproud on Twitter


– Banks including Morgan Stanley, Citigroup, Deutsche Bank and UBS raised pay for their junior analysts during 2021, Reuters reported on July 28.

– The new base salary for a first-year investment banker at Morgan Stanley would be $100,000. That represents a $15,000 rise.

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Editing by Peter Thal Larsen and Oliver Taslic. Graphic by Vincent Flasseur.

Reuters Breakingviews is the world’s leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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