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Morning Coffee: Goldman can replace 3 traders with one programmer. Deutsche Bank to hand investment bank to CFO

It’s happening. Marty Chavez will be installed as Goldman Sachs’ new CFO in April, but the spectre of automation across various front office positions is already looming large.

As Goldman’s former CIO, Chavez is a long-term proponent of automation and ‘efficiencies’ and has been instrumental in building up the banks’ tech staff to 25% of total headcount. There are parts of the investment banking process that are “begging to be automated” he told an audience at Harvard in January, which was reported by MIT Technology Review.

Specifically, Goldman has mapped out 146 distinct steps go into any initial public offering of stock, and not all of them need to be carried out by humans, suggested Chavez. Other investment banking tasks that involve relationship building and salesmanship could also be done by machines, he suggests.

The model for automation on the trading floor is Goldman Sachs’ U.S. cash equities team, which had 600 traders back in 2000, but now just has two. The rest of the work is carried out by computers and a team of 200 programmers.

“Everything we do is underpinned by math and a lot of software,” he said.

Investment bankers typically bring in $700k a year, according to figures from Coalition cited in the article, while sales and trading pay averages out at $500k. Front office compensation makes up 75% of the wage bill. Programmers are a lot cheaper.

Separately, Deutsche Bank’s investment bankers are about to have another new boss. Jeff Urwin, current investment banking chief – based out of New York – is in discussions to retire, according to the WSJ, after just two years at the top of the tree.

His replacement is expected to be Markus Schenck, Deutsche’s current CFO. Schenck does have a background as an investment banker, having joined from Goldman Sachs in 2015 where he was a partner and head of investment banking services for EMEA, so it’s not like Deutsche just handed control to an accountant. However, Schenck is based out of Frankfurt, so it sends a clear message on the shift of power.


“When was the last time you took your partner off for a weekend in Frankfurt?” (Bloomberg)

“Millions and millions” of cross-border contracts are at risk as Britain leaves the EU (Politico)

Lloyds of London is heading to Luxembourg (Financial Times)

Paris is not a safe habor for bankers (Breaking Views)

J.P. Morgan wants someone to manage its Snapchat account:

Who wants to manage the JPMorgan Snapchat account?

— Sujeet Indap (@sindap) February 7, 2017

Philippe de Caraman and Thierry Olive will head up BNP Paribas’ investment bank in Asia (Bloomberg)

Why not move to Georgia or Alabama as an investment banker? (Yahoo)

Banks are NOT shrinking. There’s a war for talent (Financial News)

“The term ‘monetisation’ comes up all the time. It’s challenging always having to justify your existence. The changes I’ve seen in the industry are frustrating and disappointing. It’s not much fun any more.” (Financial Times)

15% of Facebook’s employees are on H1-B visas – a bigger proportion than most other tech companies. (Business Insider)

What millennials want (Business Insider)

Your phone can tell you if you stink (WSJ)


AUTHORPaul Clarke

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