Morning Coffee: Are massive job cuts really coming at JPM? Worst thing ever to assail a junior banker
Some kind of haemorrhagic meltdown is due to strike JPMorgan. So says Nancy Bush, a consultant and strategic adviser at NAB Research, backed up Dick Bove, a bank analyst at Rafferty Capital Markets. Bush and Bove both think they have seen the future and that it involves some bad things at the US bank. To be precise, it entails 10,000 further job cuts and the complete eradication of Jamie Dimon.
JPMorgan is embroiled in massive global deleveraging, says Bush. "It’s just beginning to hit them over the head,” she says, "...There'll be layoffs." It doesn't help that JPMorgan is a perspiring sumo wrestler before the U.S. government's heat-seeking regulatory missile. Nor does it help that the bank only recently intimated that revenues in its sales and trading revenues will be down another 20% in the second quarter, that prop trading was banned (several years ago, admittedly) and that (in the words of the New York Post), JPMorgan is 'said to be shutting accounts of past and present foreign government officials to save on compliance expenses.' Dick Bove, for one, thinks Jamie Dimon must be at his wits end with it all. “I don’t know when Jamie Dimon finally throws in the towel and says, ‘I can’t take this anymore; this is absolutely absurd," he sighs. Someone else (unnamed) says people at JPMorgan are nervous. Another unnamed person spoke to another unnamed person who said projects have been put on hold in JPM's equity division. What more evidence can anyone need of coming catastrophe?
None of this satisfies the two key questions. Namely: Why JPMorgan? Why now? Nor does it answer the fundamental supplementary question: Will these putative job cuts hit the investment bank? Much as JPMorgan's sales and trading revenues are falling, they're falling by far less than at rival houses like Deutsche and Barclays. In the second quarter, costs accounted for an acceptable 65% of revenues across JPMorgan's corporate and investment bank, which also generated a fairly acceptable (compared to competitors) return on equity of 13%. JPMorgan has been reticent about trimming jobs in the investment bank so far. There have been a few hundred bodies removed here, a few hundred removed there, but nothing more. Headcount at JPM's corporate and investment bank was actually up year-on-year in the first quarter. Dimon has said that he thinks the rout in the fixed income currencies and commodities markets is cyclical rather than secular. Will this really change in the second half of 2014, even if two 'veteran' banking analysts say so?
Separately, take no heed of senior investment bankers who force you to take a business flight when you are suffering from a nasty sinus infection. This is the moral of a story picked up on by Slate in the wake of Bloomberg's piece last week on overworked junior bankers. It seems that a junior banker of indeterminate sex who had a sinus infection was compelled to take a business flight by his/her MDs. The outcome was not good: 'The pressure from the flight ruptured the banker’s eardrum, which started bleeding. The team pushed on with the deal talks despite the fact that the banker had lost hearing in one ear.' Worst of all: 'Upon returning to New York, the banker went straight to the emergency room, where doctors ordered no flying for the next five months, preventing the banker from attending future client meetings on crucial deals.' Therefore, blindly obeying senior bankers can not only make you bleed from the head, but it can have serious long term implications for your career. You have been warned.
Moshe Orenbuch, an analyst at Credit Suisse, says there will be a 10% workforce reduction in banking'' over a several year period.'' (Bloomberg)
Morgan McKinley thinks financial services jobs in London rose 67% year-on-year last month. to to 8,955 new vacancies. (Bloomberg)
RBC has hired Tom Millar from Barclays as head of UK and Ireland liability driven investors and banks rates sales. (Financial News)
Barclays’ restructuring is less dramatic than it looks. (William-Wright)
The number of New York-based ‘traders’ is now at an all time low. (Telegraph)
Emmanuel Gueroult,Morgan Stanley’s chairman of global capital markets in Europe, the Middle East of Africa, and Burkhard Koep, a media and cable dealmaker and a managing director, are leaving Morgan Stanley to work with French billionaire Patrick Drahi. (Financial News)
Magid Shenouda, ex-co-head of commodities trading at Goldman Sachs, is joining Mercuria. (WSJ)
The most senior US investment bankers have a drive their British counterparts lack. (Financial Times)
Now is not the time to be working in FX. (Euromoney)
Italy’s ex-Economy Minister, Vittorio Grilli, has joined JPMorgan as chairman of its corporate and investment bank division for Europe, Africa and the Middle East. (WSJ)
What with all the litigation, no one fancies being a top banker any more. (Financial Times)
Mervyn King takes down Thomas Piketty. (Telegraph)