Lunchtime Links: RBS may need to make up to 6,800 investment banking redundancies or reduce compensation by a third; SocGen's client poaching paranoia revealed
This morning was the morning of RBS's results. Suffice to say, revenues in its global banking and markets (GBM) division fell 11% year-on-year in the first half and operating profits fell 29%.
Nevertheless, GBM headcount rose by 300 people in Q211 compared to the first quarter and by 1,300 compared to the second quarter of 2010. The GBM cost/income ratio rose to 69% in Q211, up from 53% in Q1.
Despite speculation that RBS might say something concrete about redundancies, it didn't say much at all - except that it would have to, "look hard at headcount and see if there's opportunities to reduce heads."
That hard look could result in some ferocious cutting. During today's call, it was suggested that the bank would be more comfortable with a cost/income ratio of up to 55% across all divisions. On this basis, RBS would need to reduce costs in GBM by 217m in the second quarter.
Non-compensation costs are typically sticky. If compensation bore the brunt of the reduction, the bank would need to reduce GBM headcount by 5,800 people (average GBM compensation was 32k in the second quarter). Either that, or it would need to reduce pay by more than a third.
Separately, SocGen's extreme tetchiness about 'client secrets' has been revealed after it agreed to dismiss a court case involving an FX trader whom it had accused of misappropriating trade secrets with a view to making himself more employable by Credit Agricole. In fact, Bloomberg says the trader in question merely claims to have, 'provided the names of two friends as references and "a generic list of mostly hedge funds and banks which trade widely in the industry."
Two thirds of the senior managers at RBS have been hired externally. (Telegraph)
Bank of America said claims against it may rise as government-sponsored enterprises such as Fannie Mae step up demands for refunds. (Bloomberg)
Bank of America death watch. (Naked Capitalism)
BAC breaking down could very well be the modern day LEH failure. (ZeroHedge)
Citigroup shares are now at their lowest level for 17 months. (Bloomberg)
Barclays shares fell 10% yesterday. (Telegraph)
One banker, who works in the fixed income market, said he believed prop trading was still widespread, signaled by the undiminished volumes in interest rate swaps trading. (Reuters)
Mining analysts are very hot. (Bloomberg)
Citi poaches bankers for derivatives relaunch. (Financial Times)
The UK government would like to reduce the top rate of tax from 50p to 43p. (Financial Times)
Financial services recruiters are getting into triathlons. (Financial Times)
See Richard J. Byrne, the chief executive of Deutsche Bank Securities, squeeze another man between his knees. (DealBook)