Job Security Fuels Concerns over Investment Banking Industry

Students are thinking twice about working in the investment banking industry as it does not guarantee long-term employment. Rachel Gong finds out more.

By Rachel Gong

Students considering careers in the investment banking industry are worried about job security due to its potentially decreasing relevance to the global economy.

At this year’s Singapore Financial Conference (SFC) on 22 Mar at the National Trades Union Congress (NTUC) Centre, the strength of the investment banking industry was called into question.

Investment banks help companies raise capital through two ways — initial public offerings (IPOs) and debt offerings. IPOs are launched when shares of a company are sold to the general public for the first time. A debt offering is a note or bond that is offered to private investors for purchase at a fixed interest rate, allowing a company to raise capital without diluting the ownership of its shareholders, unlike in IPOs.

Investment bankers also provide advice on process and valuation during a merger and acquisition (M&A) transaction between companies.

The SFC — organised by the NTU Investment Interactive Club (IIC) — featured speakers such as Senior Minister of State for Transport and Finance Josephine Teo and a panel of high-ranking executives from multinational banks.

CAREER ADVICE: Senior Minister of State for Transport and Finance Josephine Teo addresses the audience during the annual Singapore Financial Conference, held on 22 Mar.
PHOTO: NTU INVESTMENT INTERACTIVE CLUB

A member of the audience at the SFC was advised to “head in a different direction”, after he was told at a Standard Chartered networking session that the investment banking industry was a dying industry.

HSBC’s regional head of banking Chang Tou Chen, however, rejected the notion that investment banking will wane over the years.

“The industry is definitely not at its deathbed and will continue to be forever relevant to corporate clients,” he said.

For instance, corporate clients will continue to require advice on valuation before pursuing M&A transactions. They will also require guidance when raising money through capital markets during IPOs, where precision in pricing and distribution of shares is critical.

Marvin Mansfield, 22, a third-year exchange student from NTU’s Nanyang Business School (NBS), agreed, saying that investment banking is essential in the expansions of companies.

“There is always going to be a demand for investment banks because they are the facilitators of growth,” he said.

Students’ concerns regarding the industry are merited, with many banks worldwide announcing layoffs by the thousands.

Deutsche Bank, a German-based global banking and financial services company, announced on 20 Mar that it plans to layoff an additional 500 employees from its investment bank in London.

This is on top of the 1,500 employees from their investment banking divisions worldwide, who have been retrenched as part of its efforts to reduce €4.5 billion (SGD 7.8 billion) in costs by 2015.

Ms Deborah Ho, managing director of Barclays, explained that the layoffs were necessary for a company to succeed in the investment banking sector, given its employees’ high salaries.

“It is an unforgiving industry because compensation is extraordinarily high. That is the price you have to pay to compete against the very best globally,” she said.

Despite those statistics, Mr Chang warned that they did not paint an accurate picture of investment banking as they are solely released to improve a company’s value on the stock market.

“Every chief executive officer (CEO) would like to explain to the stock market that they are cutting costs to increase share sentiment. CEOs are not going to talk about the investments that they are making to expand the company,” he added.

However, Charmaine Tham, 23, a final-year student from the School of Chemical and Biomolecular Engineering, remains reluctant to join the investment banking industry as she feels that the job is too time-consuming.

“I am interested in learning more about finance in general because I want to learn how to grow my money, but working in the industry is a different story. I will not be able to maintain a healthy work-life balance, which is one of my job priorities,” said Tham, who was at the SFC to learn more about investment opportunities in Singapore.

Employees working in the investment-banking sector are known for working long hours due to the unrealistic deadlines they have to meet.

This has contributed to an increasing trend — reported in the Wall Street Journal — of top graduates choosing technology companies like Google and Facebook over investment banks, as they promise a more relaxed corporate culture.

A 2011 survey conducted by PricewaterhouseCoopers also found that millennials value job benefits like flexible working hours more than high salary.

However, for other students like Troy Han, 22, employment in the investment banking industry was still appealing, despite the long hours and potential layoffs.

“Starting off in investment banking can be a gateway to networking with the bigwigs of the industry, and this may be rewarding for me in the long-run,” said the second-year student from NBS.