Boutique banks' travel expenses have dropped dramatically as normally-globetrotting dealmakers stayed home and cancelled restaurant reservations.
Banks saved millions in travel expenses over the three months ending June 30, compared with the same period a year ago, per a review of quarterly earnings. Now, with a rule clarification, they could spend more on entertaining clients virtually – though likely nowhere near as much as pre-pandemic levels any time soon.
Last week, the Financial Industry Regulatory Authority said members, which include bankers and traders, can expense meals and drinks when they're meeting for virtual meetings or entertainment. FINRA said the meeting's hosts need to stay online and interact with participants, and they can't send gift cards or other gifts.
The figures shed light on how much the firms spent on keeping clients happy face-to-face pre-pandemic — and show how any rethink of travel going forward could translate into big cost savings. Here's how much banks' travel spend declined in the second quarter.
Representatives for the banks either declined to comment or could not be reached for comment.
Other banks that didn't break out specific figures for travel said they likewise saw a huge drop in expenses last quarter.
Lazard, which has both sizable banking and asset management divisions, spent $100 million in non-compensation expenses, which includes travel – down 22% year-over-year. This was primarily due to lower travel and business development costs, the firm said when it reported earnings. And Oppenheimer, which runs an investment bank and other businesses, saw a 26% drop in non-compensation expenses, down to $20.6 million.
PJT Partners' founder and CEO Paul Taubman told Business Insider in early May that the absence of distractions like traveling and coordinating meetings has meant his teams had been working harder and spending more time with clients than before.
"We're not traveling, we're not spending all the time coordinating meetings. We're just getting on phone calls, video conferences, exchanging messages with clients," Taubman had said. "And I think we're able to spend a lot more time for every minute of every hour, and every hour of every day, engaging with clients without any wasted time. So I think it's also enabled us to be far more intense and far more efficient."
On PJT's earnings call last week, Chief Financial Officer Helen Meates highlighted that the firm had "virtually no travel and entertainment" in the second quarter.
"It's not clear whether it will ever get back to that level, but we certainly don't assume that it will stay as low as it did in Q2 for an extended period," she said.
Houlihan Lokey CEO Scott Beiser said on the firm's earnings call last week that while buyers still want to meet management teams and do due diligence in person, they've adapted to video tours of factories and other virtual workarounds.
"The longer this stay at home, lack of travel exists, I think people will continue to be willing to do deals without kind of a normal procedure that you once did," Beiser said. "Now that we're four months into this process, we are clearly seeing buyers, sellers, lenders, and borrowers are more willing to do a certain number of things remotely that they would have never contemplated doing even a year ago."
Read more:
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- Virtual tours are being hyped as a way for commercial real estate giants like CBRE and JLL to keep deals flowing. Here's a look at how they work — and what factors they can't replace.
- More remote work, less travel: Here's how 34 CEOs at top financial firms are thinking about the future of investing, trading and banking.
