Big banks losing commercial lenders to ‘less regulated environment’
Big banks in the US lost at least more corporate and commercial talent last year than at any time in a decade, according to new data on turnover from consulting firm Sheffield Howarth.
Twenty-one large banks lost 111 high-level bankers from their corporate and commercial business units, Sheffield Howarth found in a report, with only 99 being hired in their place. The report mainly focused on US megabanks, large foreign banks operating in the United States, and large regional banks.
The losses came despite a record increase in expenses last year, driven in large part by higher wages paid in the so-called war for talent. Some bankers moved to smaller rivals within the industry, but more often they took jobs at smaller private equity firms and debt funds, which can replace the scale of flexibility in the competitive credit market.
Wells Fargo, Citigroup and JPMorgan Chase all experienced net losses in their corporate and commercial units last year from high-end bankers, according to a new report.
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“There’s an appeal to working in a less regulated environment,” Sheffield Howarth director Gene Swift said in a recent interview, “and people are moving from battlecruisers to more nimble frigates.”
JPMorgan Chase executives said on May 23 of the company Investor Day That higher salary was one reason why the bank’s total spending was expected to reach $77 billion this year. As Sheffield Howarth reports, JPMorgan lost 13 corporate and commercial bankers last year and brought in six.
“We are sensing greater wage inflation across franchises,” said Daniel Pinto, chief operating officer at JPMorgan and chief executive officer of the firm’s corporate and investment bank.
Of the nearly two dozen banks studied, Wells Fargo had the highest turnover. According to the report, San Francisco Bank lost 27 bankers from its corporate and commercial teams and brought in only eight.
As regulators cracked down on Wells Fargo amid a string of scandals in recent years, Swift said the San Francisco-based bank had “a level of morale.”
But in April, Wells announced the appointments Tim O’Hara Property Manager away from BlackRock. O’Hara serves as Head of Banking at Wells Fargo’s Corporate and Investment Banking arm.
Sheffield Howarth Managing Director Julian Bell said, “This is a very significant hire and in our opinion very good. This will help the corporate and investment bank to enhance its trajectory.”
O’Hara is expected to attract new talent to Wells Fargo as the company tries to put its troubles behind it. Referring to the turnover the 1.9 trillion-asset bank saw in 2021, Bell said: “I don’t think you’ll see that this year.”
But as the supply of experienced talent dwindles within the banking industry, it may be difficult for some banks to rely on outside hires to offset losses.
Some headhunters anticipate that banks will turn to young candidates within their own ranks to fill up the recent vacancies.
“There just aren’t enough people of normal age to fill senior management positions, you know, that’s part of the gap as well,” said Carl Wilkinson, president and CEO of executive search firm Smith & Wilkinson. “And I think that creates opportunities for millennials to find themselves in leadership positions faster than in previous generations.”
As Sheffield Howarth reports, Citigroup terminated eight senior banking executives, and HSBC lost a net of five.
A major bank showing progress in the “war for talent” last year was Bank of America. The Charlotte, North Carolina, company made a total of 11 appointments to its corporate and commercial banking team, more than making up for the 10 bankers it lost.
Bell said BofA is an example of how aggressive talent acquisition investments made by big banks can pay off. “Large-cap banks are now saying they have a lot to do in this area.”
