Morning Coffee: Horribly lean year now assured for many in banking. Laid-off trader lands new top job
U.S. banks’ trading revenues have plunged, leading them to rely on other business units for growth or at least stability. However, even if trading picks up between now and year’s end, traders’ bonuses for this year will likely take a big hit.
Wall Street competitors are relying on investment banking to take the slack, and Jefferies – traditionally considered more of a trading house – is no exception, according to Bloomberg.
Five years ago, Jefferies’s revenue from dealing stocks and bonds was almost double what its bankers generated. In contrast, the firm’s trading revenue dropped 7% over the past several months to $319.5m, the lowest level in a year and a half, a sign that an industrywide decline in transactions is worsening.
Luckily investment banking saved the day for Jefferies, as fees surged 61% to a record $475.7m for the quarter driven by bond underwriting and the advisory business. Revenue from the debt capital markets unit more than doubled to a record $186.3m in the quarter, while advisory fees rose 32% to $203.4m. Jefferies’ profit in the fiscal third quarter more than doubled to $83.8m as net revenue advanced 22% to $800m.
That chimes with the rest of Wall Street. In the first half of the year, the five largest U.S. investment banks – J.P. Morgan, Bank of America Merrill Lynch, Citigroup, Goldman Sachs and Morgan Stanley – posted combined investment-banking revenue of $15.3bn, a 20% increase from the same period a year earlier, per Bloomberg. Trading revenue held steady at $39.5bn.
J.P. Morgan, Citi and BAML have seen trading revenue declines ranging from 15% to 20% in the third quarter from the same period a year ago.
Separately, HSBC knew it needed to step up its electronic trading game, so it hired Robert Crane, formerly of KCG Holdings and Goldman Sachs, one of the most senior trading executives in Europe. He’s taken on a newly created role at the British bank – the global head of cash execution, reporting to Hossein Zaimi, the global head of equities, according to Financial News. Crane left KCG in July, so that's a pretty fast turnaround...
City banker bonuses are up 10%, Brexit be damned. (Business Insider)
Ken Hitchner has been appointed chairman/CEO of Goldman Sachs in Asia-Pacific ex-Japan, replacing the retired Mark Schwartz. (FT)
Here’s a question for ECM bankers to ponder: Does the IPO process cause “brain damage?” (New York Times)
Take a peek at an activist investor’s letter: “Should Deckers' strategic review process not culminate in a sale of the company at an attractive value to all stockholders, we will be prepared to seek significant board change at the company's next annual meeting by nominating a slate of director candidates to replace the entire board.” (Bloomberg)
Hedge fund manager David Stemerman is closing his Conatus Capital Management after a decade to run for office as the Republican candidate for the governor of Connecticut. (Bloomberg)
The world’s biggest sovereign wealth fund has surpassed $1 trillion. (Bloomberg)
Bill Gross left Pimco, the fixed-income asset management giant he co-founded, to run a new, smaller portfolio at Janus, but his performance is currently trailing a comparable fund he used to manage. (Bloomberg)
J.P. Morgan is partnering with yet another fast-growing financial technology firm. (Bloomberg)
Therese Tucker broke Silicon Valley's gender barrier – and built a $1.5bn tech company. (Inc)
Silicon Valley’s labor force has begun to shrink as insanely expensive housing prices continue to take their toll. (Bloomberg)
Bridgewater Associates founder Ray Dalio says bitcoin is a bubble. (Bloomberg)
Could Bitcoin be worth zero? (WSJ)