Morning Coffee: The best of times, the worst of times in banking. A hedge fund billionaire fires back
As if bankers didn’t have enough to worry about with the fallout from the Brexit referendum, both major parties in the U.S. are attempting to drum up populist support by advocating for bringing back the Glass-Steagall Act, which would break up the big banks by forcing commercial banking to remain separate from investment banking. Of more immediate concern are banks' second-quarter earnings, which ranged from disappointing and “meh” to surprisingly decent and off-the-charts amazing.
Evercore Partners’ Q2 results fell into the latter category, as executive chairman Roger Altman said that the first-half of 2016 was the best six-month stretch in the boutique investment bank’s two-decades-plus history, which he attributed to “buoyancy in M&A” fueled by low interest rates, credit availability and record-high stock prices. For Altman, the former co-head of investment banking at Lehman Brothers, the vice chairman and head of M&A advisory at the Blackstone Group and the Deputy Secretary of the U.S. Treasury under former President Bill Clinton, it is the best of times.
On the other hand, while Lazard’s Q2 earnings weren’t exactly the “worst of times,” they were certainly disappointing. The largest independent investment bank’s Q2 profit fell 79% as M&A and asset management fees plummeted. That said, CEO Ken Jacobs painted an optimistic picture, predicting a stronger second half of the year buoyed by its work on Shire’s $35.5bn acquisition of Baxalta and SoftBank Group’s $20bn purchase of ARM Holdings.
Credit Suisse’s Q2 earnings fell into the “surprisingly decent” category, with the Swiss bank’s $173.5m net profit beating analysts’ predictions by a wide margin and providing validation for CEO Tidjane Thiam's restructuring efforts. Still, there’s a long road ahead as Credit Suisse continues to cut costs and shifts its focus away from investment banking in favor of wealth management. Its recent cost-cutting initiatives have included thousands of layoffs.
Separately, a day after the New York Times published an exposé on Bridewater Associates’ culture of “radical transparency” in which every meeting is recorded, the world's largest hedge fund was “left with no choice but to respond to sensationalistic [sic] and inaccurate stories, both to make clear what is true and to do our part in fighting against the growing trend of media distortion.” The spokesperson went on to say that the surveillance was actually “to enable employees to hear virtually all discussions happening at the firm for themselves” and create “a real idea meritocracy.”
Some have called into question founder Ray Dalio’s argument that recording everything that happens in the Connecticut headquarters allows problems and weaknesses to rise to the surface and be dealt with objectively.
At the other end of the spectrum, a new book, An Everyone Culture: Becoming a Deliberately Developmental Organization, highlights the benefits of radical transparency, using Bridgewater as one of the central case studies bolstering the authors’ thesis.
France is ready to receive 25,000 banking jobs from London (Financial News)
Bill Gross will be the sole portfolio manager of the Janus Global Unconstrained Bond Fund. It's shifting Kumar Palghat from his role as co-manager of that strategy to become co-manager of a new ETF. (Bloomberg)
More than a third of international students say they are now less likely to study at a UK university following last month’s vote to leave the EU, according to a Hobsons survey. (Financial Times)
Former Wall Street banker and World Bank economist Pedro Pablo Kuczynski took office as the president of Peru. (Business Insider)
The U.K. Serious Fraud Office has begun another round of interviews of former Barclays executives to gather more information about the bank’s 2008 Qatar fundraising. (Bloomberg)
Japanese telecommunications giant SoftBank hired Ervin Tu as co-head of corporate finance and mergers and acquisitions. He was most recently a managing director in the technology, media, and telecommunications banking group at Goldman Sachs. (Business Insider)
Art-secured lending has increased by 15% to 20% annually over the past five years to become a $15bn to $19bn market in the U.S. (Bloomberg)
"Equity" is a new feature film about Wall Street that is written, produced, directed and starred in by women and, rather than vilifying investment bankers, they are portrayed as “badass.” (Business Insider)
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