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Evercore bumps up pay, promises to keep hiring

Once upon a time, boutique bank Evercore paid really, really well. And then one thing led to another, Russia invaded Ukraine, and now boutique bank Evercore only pays really well. But things might have just changed.

Evercore had its third quarter 2023 results day today, and the bank is spending more paying its people. Year-on-year, compensation spending in the third quarter was up 10%, which more than covered the 3% increase in headcount.

All things being equal in Q4, Evercore is now on track to pay $656k this year, which considering our estimate in July that the bank was on track to pay $628k, isn’t so bad.

Why is Evercore paying more? It might be because these are average figures and the firm has just finished what founder Roger Altman called the “largest, external hiring surge, at the SMD [senior managing director] level, in the firm’s history,” and because senior managing directors don't come cheap.

It may also be because Evercore - like most other banks is waiting for deals to come back and because, like most banks, it's optimistic it will happen soon. The boutique noted the huge amount of dry powder (capital) held by financial sponsors (private equity funds) begging to be deployed (spent). The private capital allocation (PCA) market is also strengthening. There is reason to be optimistic. All that's needed is stability, it says, although the bank's senior leadership also implied that it might be a year until things are ready to pick up again.

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In the meantime, Evercore is still building its team. Executives on today's investor call said they have a hiring pipeline lined up for next year and that the opportunities for picking people up are " quite extensive" and it's "a good time to be investing.”

Until revenues recover, Evercore is spending more than it might like to on its people. The bank’s compensation ratio, the amount of its revenue that it spent on pay, went from 60.8% in the first nine months of 2022 to 66.8% in the same period of 2023. Non-compensation expenses also increased, from 14% to 18.3%. That resulted in profits nearly halving – from $8.54 per share to $4.52 in the same period. 

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AUTHORZeno Toulon

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