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Paging @2rafa or anyone else who can explain to me what an investment banking analyst actually does: AI is coming for Wall Street: Banks are reportedly weighing cutting analyst hiring by two-thirds (paywalled for me on desktop but it's loading fine on mobile):
I don't know how to evaluate the claims in the article because I have little understanding of what a banking analyst actually does on a day to day basis. How much of it requires "thought" (not thought of incredible complexity and originality, but thought nonetheless) and how much of it is just plugging numbers into Excel in a relatively formulaic fashion?
In general I lean towards being skeptical of these claims, especially in domains where I have little expertise, because the dominant pattern of the last 2 years is that people who don't know much about X tend to overestimate how good AI is at X.
If I compare this to a domain where I do have some knowledge (computer programming), most of the tests that people use to demonstrate LLMs' coding ability aren't particularly representative of what programmers do on a daily basis. Sitting down and opening a new blank file and "writing code to do X" is certainly part of the job, and it can be a bigger or smaller part of the job depending on what type of organization you're at and what type of project you're working on etc, but it's not the whole job (for some programmers, it's a very small part of it!)
So I'd like people with more domain knowledge to weigh in on what aspects of these financial jobs are liable to be automated today and what the forecast for the field is like.
They're essentially on a long, well compensated trial period for one of the jobs selling large businesses on strategic ideas (financing, mergers, etc). This is what senior investment bankers do, they'll convince CEOs to accept a merger proposal, strategize ways to not merge, find a financing tool that meets the company's needs and desires etc.
The junior analysts are usually cranking out pitch documents for senior guys (who will shift quickly based on market changes). Modelling a company's operations and estimating the effects as financial inputs are changed. Let's say an oil refiner is at a crossroads:
They have older plants that are well placed for cheap inputs but RINs are eating their margins and they'd like to know what one of their older refineries would sell for vs using new equity financing to build a biofuel refinery to generate RINs of their own vs selling the company to Valero and using the money to buy a poorly placed competitor and converting all their refineries to renewable fuels and making money selling RIN to Valero. So the CEO will call the bankers he knows and they put teams of analysts on laying out all those scenarios (and others) then the senior banker will meet again and give the CEO the best of the options. There are almost always some changes like half way through 2 board members may want to buy out one refinery so all the pitches need to be changed to reflect the new option.
Oil and gas, especially exploration/upstream is a unique subfield in IB in that the best teams will actually employ oil engineers with industry experience to run calculations to find minimum viable oil prices etc for projects, but your example is way more complex than what most investment banking analysts do. The average M&A analyst is downloading spreadsheets from Bloomberg and looking through annual/quarterly reports, running rote calculations on them (with many fake numbers) and massaging the resulting data into a few charts that they then spend hours aligning on a PowerPoint. For ultra niche fields they’re more likely to hire a consultant to do the modelling for them if they think they must.
I agree that the analyst (and by extension associate) role is mainly just to create pool from which to hire more senior bankers, though.
I work opposite your BB banks who are financing energy infrastructure. They’re definitely experts in finance and the industry and have a very specific and well thought out view of the investments financials. I agree this is likely a niche area but the analysts I work with are very bright and doing good work. Though I will admit that they’re not 22-25 year olds generally.
You’re painting a picture of the banks as mainly salesmen and make-work. I have no doubt that’s a large part of it, maybe even a majority. But I think you’re overstating it.
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