Investment Banking Salaries: Just How High Are They?

| Posted: 05-03-2008 | Comments: 0 | Views: 37 | Rating: (59)

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Just how much do investment bankers actually earn? Most of the people who want to break into investment banking have no idea how much money is really involved.

Sure, the Managing Directors and other senior people make several million a year on average; group heads can make $10 million or more. And the CEO of an investment bank can make upwards of $20 million, with Goldman Sachs CEO Lloyd Blankfein making over $70 million in 2007.

But what does an entry-level investment banker - an investment banking analyst - actually make? Making six figures as a 23-year old just out of college is nice, but if you have to work 120 hours per week, you can't possibly be making that much per hour, right?

I honestly didn't know, so I had to investigate this and do some math myself. Could you actually make more working at McDonald's than you could at Goldman Sachs, at least on an hourly basis?

For investment banking analysts, the best case scenario ever happened in 2007. Base salaries were $60,000 and bonuses were $90,000, for a total of $150,000 in compensation. Again, not bad for a 23-year old's first "real-world job."

But what about the hours? Typically, entry-level bankers work around 90-100 hours per week in their first year. This could be off by a bit, but we'll go with it for now.

With 52 weeks of work per year (nope, no vacation) and 90 hours per week, you would have earned $32.05 per hour in the 2006-2007 year. If you had worked 100 hours, that would have dropped to $28.85.

Even if you had worked 140 hours a week, every week, you would still be at $20.60 per hour. And realistically it's impossible to work that much consistently, so you could have only done better than that.

But times have not always been that good. After the Nasdaq crash and at the start of the last major recession, investment banking took a turn for the worst and bonuses disappeared.

In 2001-2002, Analysts were lucky to get $10,000 for their bonuses. They still worked a lot, but mostly on marketing and pitching clients rather than doing deals and bringing in revenue.

A $10,000 bonus and $60,000 salary means $14.96 per hour at 90 hours a week. Believe it or not, that's still above McDonald's wages and is actually not even that bad relative to a lot of jobs in the US.

But if you had worked 140 hours per week, consistently, back then? You would have made 9.62 per hour.

According to a Wiki Answers page on McDonald's, the wage is $9.30/hour for those under 17 and $9.57/hour after "4 months of training."

This is a very low wage, and it looks like even in the worst possible years of investment banking, hourly analyst wages never dropped this low.

Actually, the above is not strictly true. What if you earned $0 for the bonus and only made the base salary of $60,000 while working 140 hours each week?

That would be $8.24 per hour. Finally: below McDonald's wages. So theoretically it is possible to earn less than a McDonald's worker as an investment banking analyst, though not terribly likely.

It could only happen if you worked a ridiculous amount in the very worst years of investment banking and got absolutely nothing for your bonus.

Even with a looming US recession, this scenario seems unlikely to return anytime soon. So your hourly wages as an investment banking analyst should be safe.

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Article Tags: Investment Banking, Investment Banking Salaries, Investment Banking Jobs, Investment Banking Bonuses

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About the Author:

Ian Spellfield, a former investment banker, advises students and young professionals on understanding investment banking and how to earn high investment banking salaries.

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Investment Banking Salaries: Just How High Are They?

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