Morning Coffee: How J.P. Morgan suppresses its jerks. Deutsche's end game?
If you have a long enough memory to recall Bob Diamond as CEO of Barclays Capital, you may also recall that Bob had a technique for keeping BarCap 'nice'. Known as the "no-jerks" rule, it theoretically involved zero tolerance of the sins of greed, ostentation and self-centredness and saw 30-40 intolerable BarCap employees suspended. Now it seems that J.P. Morgan may be employing something similar.
At an event hosted by the Wall Street Journal this week, J.P. Morgan CEO Jamie Dimon said he has a simple technique for keeping the upper echelons of the bank free of jerks: he doesn't promote anyone he wouldn't want to work for himself. Dimon explained that he watches out for obnoxious behaviour and observes 'how leaders treat others when they walk into a room.' One unnamed J.P.M manager was castigated by Dimon for greeting all the men and ignoring all the women. Dimon's ire is especially directed at male bankers who forego their families for golf outings: "If you play golf every weekend, I call that child neglect. You really have to change your life and get over it and help. That burden [of raising a child] is enormous.”
Separately, FT Alphaville thinks it has seen the future for Deutsche Bank (don't we all?) and that the future is not at all good. Alphaville says Deutsche can choose to remain independent of the German state by "gutting itself until it achieves profitability (a.k.a survive as a much smaller institution) albeit without any guarantee of actual survival, or it can, "become the founding member of the state-sponsored Eurozone banking cartel." This harsh verdict is based upon a Forbes post by Frances Coppola which noted that Deutsche Bank posted a $7.7bn full-year loss for 2015, followed by a 20% second quarter revenue drop in Q2 2016. Deutsche's inability to, "generate enough profits to cover its costs and its current size (including support for legacy bad assets)," is the real issue here says Alphaville.
In Deutsche's defence, though, it's been kitchen-sinking its losses since Cryan arrived and last year's loss was the result of restructuring and fines rather than operating issues. And then, the second quarter was challenging for most banks. Dan Davies, senior research advisor at Frontline Analysts provided a more accurate representation of Deutsche's situation in a tweet this morning: "Deutsche is, intrinsically, not a loss making business. It very rarely makes operating losses. It's a 5% RoE with a long tail of liabilities."
Deutsche's memo to staff: Deutsche is a "much safer and stronger bank than it was before the financial crisis." (Business Insider)
But Deutsche is ok, the Q&A. (Medium)
Deutsche could raise €2.8bn just by cutting this year's staff bonuses and clawing them back from previous years. (Bloomberg)
Axel Weber, chairman of UBS and former president of the German central bank: "In my view, the system is much more stable now [than during the Lehman crisis], so interventions in the future will only be driven by the need to stabilize the system — and there will be no focus on single players.” (MarketWatch)
The paranoid ethos of Tidjane Thiam: "In life you should only worry about the bad outcomes. If you raise capital and you're wrong, it's ok. If you don't raise capital and you're wrong, you die." (Business Insider)
Senior staff at banks in the UK have found a way around onerous new rules making them criminally liable for mistakes on their watch: they're giving more responsibility to juniors. (WSJ)
A messy Brexit will lead to "pandemonium": Viswas Raghavan, deputy chief executive officer for Europe, the Middle East and Africa at J.P. Morgan. (Bloomberg)
Defining Brexit: “Very Hard Brexit”=dumping the EU, accepting World Trade Organization rules. “Hard Brexit”= a minimal trade pact with the EU. Soft Brexit=UK joins the EEA and stays within the single market but has no control over its rules. (Open Europe)
London Mayor wants to issue visas to people who would work in London post-Brexit. (Sky)
Wanted: Banking Supervisory Analyst based in Frankfurt. Must speak German. (Europa)
Harvard Endowment upset. (The Crimson)
Once upon a time, banks like Goldman Sachs ranked in the top 10 in China. Now the banks there are all homegrown. (WSJ)