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Banking’s Game of Musical Chairs

If you want to work at a full service bank, your options may soon be limited. Only five or six “bulge bracket” firms, banks that offer a complete suite of investment banking and trading products on a global scale, will likely remain if returns don’t improve significantly, according to consulting firm McKinsey.

The report, with the dramatically ominous title, “After the Reckoning,” suggests that several banks will go the way of UBS or Royal Bank of Scotland, which are exiting businesses like fixed income and equities, areas where they feel they can no longer compete, according to Bloomberg.

The main concern is the average return on equity for large investment banks, which McKinsey believes will fall between 6% and 9% by 2017 unless “significant actions” are taken. Banks will need to up their ROEs to roughly 11.7% by that time to remain viable. If not, you may soon be able to count these so-called bulge bracket firms on one hand.

And speaking of investment banks paring down, a source within Barclays told eFC that the firm is now likely to begin laying off U.S. investment bankers on Wednesday next week, rather than at the end of this week. The cuts will be made before performance reviews and bonus discussions take place.

Rules Mean Jobs (WSJ)

Lending standards in the private-mortgage market have tightened. That means more paperwork and, in turn, more mortgage processing jobs.

RIP (S.F. Business Times)

A.W. "Tom" Clausen, former chairman of Bank of America and one-time president of the World Bank, died on Monday. He was 89.

Getting Head in Equities (eFinancialCareers)

Technical knowledge and knowledge of market structure are now key to getting to the top in equities trading. Just ask Goldman’s new head of equities, R. Martin Chavez.

No Vacancy (WSJ)

Goldman Sachs isn’t too keen on a shareholder proposal that calls for the board to adopt an independent chairman. The firm is trying to block the proxy ballot.

Breaking Up is Necessary to Do (Bloomberg)

Big banks need to be broken up, or at least further pared down, for investors to put the pains of the financial crisis fully behind them, according to a new poll.

The Ladies of Davos (Financial News)

At least one in five delegates sent to Davos for the World Economic Forum must be female. Here they are, in head shot form.

Defense to Offense (Deal Journal)

J.P. Morgan Chief Executive Jamie Dimon apologized to shareholders at Davos for the firm’s more than $6 billion trading loss, but then went on the offensive, attacking those who openly attacked big banks.

Buzz Around the Office

Rent the VHS (BuzzFeed)

Among the many memorable lines in the movie “Princess Bride” is this: "My name is Inigo Montoya. You killed my father. Prepare to die." The line makes for a great t-shirt, too, unless you’re on a plane with a bunch of people who haven’t seen the movie.

List of the Day: Giving Notice

Just gave your two weeks’ notice? Here’s how to make the most of it, from a professional perspective.

  1. Finish your work. Keep the reference intact.
  2. Round out your portfolio with an interesting task.
  3. Think outside the box and take some risks.

(Source: The Daily Muse)

AUTHORBeecher Tuttle US Editor

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