Morning Coffee: Goldman Sachs? Or Morgan Stanley? The crazy patience of coverage bankers

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Should you work for Goldman Sachs? Or Morgan Stanley? If this question was troubling you, the past few days will have been illuminating. Yesterday was Morgan Stanley's results day. The James Gorman-led bank did rather well. Most notably, it did rather well compared to Goldman Sachs.

While Goldman's good second quarter was driven by M&A and unpredictable windfalls from its private equity business, Morgan Stanley's investment bank did ok in equity sales and trading, very well in M&A and capital markets and not too badly in fixed income currencies and commodities.

For example, revenues in Goldman's equities sales and trading business fell 24% year-on-year in the three months to June, but revenues in Morgan Stanley's equities business were stable. Revenues in Goldman's fixed income currencies and commodities sales and trading business fell 11% year-on-year in the six months to June. Ok - Morgan Stanley's fell 13%, but Gorman was at pains to point out that revenues in Morgan Stanley's comparable business were actually stable once debt valuation (DVA) adjustments are taken out. And while Morgan Stanley's investment banking (M&A and capital markets) revenues rose 27% in the first six months of 2014 compared to the same period last year, Goldman's were up a merest 14%.

All together, Morgan Stanley is looking a more appealing place to be. As the Wall Street Journal points out, it used to be the case that when Wall Street sneezed, Morgan Stanley caught the flu. Not any more.

However, it's not all good at Morgan Stanley. While Goldman executives say they're happy with the firm's headcount and are even increasing pay, Morgan Stanley is still on a cost-cutting drive and continues to hammer pay down. And as Businessweek notes, Goldman Sachs gets more done with fewer people - it had 24,000 fewer employees than Morgan Stanley last quarter. This translates to higher pay per head: $121k per person at Goldman vs. $75k at Morgan Stanley.

Separately, Financial News has an interesting story illustrating the importance of patience if you work in M&A. Jens Welter, global co-head of consumer and retail investment banking at Credit Suisse, has reportedly been meeting with Lindt, the Swiss chocolatier, for the past decade. During this time, Welter has reportedly met with Lindt's management once every two months and called them on a daily or weekly basis whenever 'strategic options' are being considered. Despite all this assiduous attention, Lindt has only done a few sharebuybacks (in 2011 and 2013) while Welter's been on the account.

Suddenly, however, all Welter's wining and dining is paying off. Lindt is engaging in a $1.4bn deal to buy U.S. confectionary group Russell Stover. Welter will suddenly have what a rival banker describes as his, "pay day for 10-plus years of work”.


JPMorgan gave Jamie Dimon 2 million stock-appreciation rights in January 2008, saying they would be available in five years if the board still deemed it appropriate. They are now worth $37m and are about to vest. (Bloomberg)

Hedge funds attracted the strongest inflows in the first half of 2014 since the first half of 2006.(Hedgeweek)

RBS is closing its distressed debt unit.More closures may follow. (Bloomberg)

The European Union’s Alternative Investment Fund Managers Directive (AIFMD) is being verified next Tuesday. This says that large hedge funds must defer at least 40% of pay. (Barrons)

The Financial Stability Board wants to create a new centralized FX hub to match buy and sell trades. This could be bad news for FX voice brokers.(FT)

Ex-Nomura CEO John Phizackerley will become the CEO of Tullet Prebon on September 1st. This is despite the problems faced by the interdealer broking industry. (Yahoo)

How to write a killer CV that gets you hired. (300 Hours)

The authenticity trap for workers who are not straight white men. (HBR)

How it is on the Goldman Sachs summer intern programme. (Goldman Sachs)

Related articles:

Is it worth burning out for less than £100k? Retail bankers causing annoyance at Barclays

When naïve traders agree to informal bonus formulae. BofA’s big junior hiring won’t benefit interns

Where to find 8,500 finance jobs a month. When senior bankers’ sons get summer jobs in banking



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