A refreshingly optimistic look into the future of investment banking
You’d be making a bit of an understatement if you said there weren’t that many optimistic people left in investment banking. Well, there’s at least one, although he just retired, so maybe all the fresh air and full nights of sleep are going to his head.
Hans-Joerg Rudloff, the former chairman of Barclays’ investment bank and father of the eurobond market, said the industry is “looking at a golden decade.” While his argument isn’t terribly detailed, Rudloff sure is passionate, telling Bloomberg that investment banking has a “brilliant future.” It’s just not one that many will recognize.
As soon as banks adjust to new capital requirements and trading rules, profits will bounce back, he said. “Investment banks are two-thirds down the road of adapting, and the U.S. banks are further down the road because they’ve been faster at adjusting,” Rudloff added.
Banks will suffer from a ban on proprietary trading, but FICC pains appear to be temporary, he suggests, noting that banks are simply de-risking to meet new capital standards. Their new role – as an intermediary, rather than a principle risk taker – will eventually be a wildly successful one, he said.
Now you may want to take Rudloff ‘s words with a grain of salt. He built his 50-year career on being one hell of a salesman. In the book “Global Bankers,” author Roy Smith commented on Rudloff ‘s adeptness at “smelling opportunities in the market and stretching the system to accomplish the undoable, by cajoling, badgering, and threatening all the players into commitments.”
Plus, Rudloff ‘s timing isn’t fantastic, at least this time around. On Wednesday, Sanford C. Bernstein issued a report suggesting that Barclays may need to cut as many as 7,500 more investment banking jobs, with a particular focus on fixed income. Sources in the bank tell us that number is “exaggerated,” though clearly the knife is coming out. We’ll hear more on May 8, when Barclays lays out the latest chapter of its long-term investment banking plan.
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Boutiques the New M&A Rage (Bloomberg)
Goldman Sachs, J.P. Morgan and other big banks are now facing an unfamiliar foe in the battle for M&A fees: tiny boutiques with as few as two employees.
Lisa Carnoy, Bank of America’s head of global capital markets and one of the highest-ranking women on the Street, will now manage the parent company’s U.S. Trust wealth management unit. She’s also earned a seat on BofA’s operating committee. Elsewhere, Wells Fargo has promoted Jonathan Weiss to the head of its securities unit.
Define Insider Trading (DealBook)
A federal appeals court seems destined to change – or at least properly define – the criminal definition of insider trading. The end result could flip the New York Attorney General’s 80-0 court record on its head.
From 2009 to 2012, state-owned conglomerate China Resources partnered with Credit Suisse on most of its banking deals. Why? It could have something to do with the fact that the mistress of the Chinese firm’s chairman worked at Credit Suisse during that four-year period. She left for UBS in 2012. The Swiss firm hasn’t consulted on a deal since.
Competent AML Workers Needed (WSJ)
Banks are desperate for anti-money laundering personnel but are having serious issues finding competent employees. Some banks are being forced to hire people who “masquerade as professionals and experts.”
Buzz Around the Office
Michael Richman, the chief of compliance officer at Goldman Sachs, is suing his Bedford, New York neighbors over the smell of manure emanating from their property, despite the fact that he and his wife also have horses. When asked in court how he knew the smell wasn’t coming from his animals, Richman “basically got up in court and said, ‘My poop doesn’t stink,’” according to his neighbor.
Quote of the Day: “There is a clear consensus that we are witnessing our second tech bubble in 15 years. What is uncertain is how much further the bubble can expand, and what might pop it.” – David Einhorn in a letter to investors
