September 10, 2012 / 4:53 PM / 6 years ago

Goldman junior bankers branch out as deals dry up

LONDON (Reuters) - Goldman Sachs (GS.N) has shaken up its junior investment banking teams in Europe, asking bankers to multi-task rather than specialize in particular industries, as a slowdown in deals also forces rivals to rethink the way they do business.

Traders work on the floor of the New York Stock Exchange near the Goldman Sachs stall July 16, 2010. REUTERS/Brendan McDermid

Several competitors, including Switzerland’s Credit Suisse CSGN.VX and Japan’s Nomura (8604.T), have also loosened up team structures in similar ways, making the most of their resources amid faltering revenues and cutbacks.

At Goldman, analysts and associates — the two most junior ranks in investment banking — have been pooled together to work on deals across industries such as healthcare, private equity and media, according to an internal memo seen by Reuters.

Divisions by country teams across Europe, the Middle East and Africa will also be lifted for junior bankers, who will instead be split into Northern and Southern groups.

A Goldman spokeswoman confirmed the contents of the memo.

Many investment banks organize their corporate finance or mergers and acquisitions (M&A) businesses into industry sectors, so that bankers can get to know certain companies well, helping them to win mandates on deals.

But activity has dried up this year as euro zone fears worsened, with fees from M&A fees in Europe tumbling some 36 percent to around $4 billion this year compared with last year, according to Thomson Reuters and Freeman Consulting data.

In response, banks have been cutting staff as well as curbing costs in IT and elsewhere, while even senior bankers specializing in areas such as equity capital markets — advising companies on listings — have already been branching out to take on more unfamiliar tasks.

The move by Goldman and others to reorganize teams may benefit the junior staff concerned, at least giving them deal experience in a slow market.

“The ability to have a variety of experience is in fact superior to concentrating early,” said Scott Moeller, a professor in Cass Business School’s finance practice who has previously worked at Deutsche Bank and Morgan Stanley.

Moeller said the changes were unlikely to worry clients, who were generally more concerned about the industry experience of senior advisers.

He said firms were also revisiting a model employed by investment banks well before a big boom in the M&A industry over the last 20 years gave rise to bigger, more specialized teams.

“It sounds like a back to the future move. In the 1980s it was common that you wouldn’t specialize until you passed the associate level,” Moeller added.

At Nomura, teams of analysts and associates in corporate finance were also reorganized in January in a more flexible manner, two sources familiar with the matter said. They are still attached to industry groups but can be asked to pitch in on deals in other areas.

Nomura declined to comment. Its investment banking division is facing job cuts as the bank looks to chop $1 billion in costs.

Credit Suisse brought in similar changes in EMEA at the start of this year, with analysts and associates previously organized by country and narrow industries redistributed to three broader industry groups.

At Goldman, the financial institutions and natural resources sector are the only ones that will be structured as before, the internal memo said. The announcement dates back to July but has only surfaced now.

Editing by David Cowell

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