Morning Coffee: Inside the brutal shrinkage at UBS. The new fast-track to partner at Goldman Sachs
Sergio Ermotti, CEO of UBS, knows that leading a big bank requires tough decisions. In an interview with Bloomberg last week, he said that he learned early that he needed an ability to "kill your darlings". "When you need to have difficult discussions with people who’ve been working with you for a long time, it’s not easy. You have to recognize that things have changed and move on,” he said.
Ermotti was responsible for bringing in Andrea Orcel from Bank of America Merrill Lynch to lead its investment bank in 2012. Orcel immediately set to work on simplifying the investment bank, exiting fixed income business lines in which UBS lagged the competition, focusing on strengths, slashing risk-weighed assets and immediately firing 1,200 people. Through its 'Accelerate' program, UBS would eventually slash 5,600 jobs across the bank, and UBS set a precedent by letting the initial victims discover their fate when they arrived at work to find that their access cards no longer worked. This was a technique later emulated by Nomura and others when they made layoffs in London.
Orcel, who's strategy was later vaunted as model for other investment banks to follow, does not look back on the time with fondness. Financial News has interviewed Orcel as part of a retrospective into UBS's radical shrinkage of its investment bank. “For me, it was horrible,” he said.
Whether UBS's restructure has really worked remains to be seen, however. Orcel and Ermotti's restructure has won plaudits, but the share price remains subdued. And, if the primary purpose of UBS's investment bank is now to support its goals as a wealth manager, it remains something oversized. For the 4,750 people or so left in its investment bank, it may have to cut more if this is its ultimate ambition.
"UBS is maybe more of a wealth manager than an investment bank, but the investment bank is still very large,” one banking analyst told FN. “If being rated as a wealth manager was their objective. They have to tackle that factually; there is no amount of spin you can put on that to make it a perception”.
Separately, as we've written about before, the bi-annual partner promotion cycle at Goldman Sachs is a complex system of having a good 'rabbi' supporting your case, undergoing 'cross-ruffing' - where partners leading the selection process interview various other partners across departments to assess a candidate's viability - and working in the right division at the right time. Now, though, there's a fast-track - having experience in a technology role that banks are desperate to hire for.
Jeff Wecker, a former senior manager at Bridgewater Associates, has just joined Goldman in the newly-created role of chief data officer, according to the WSJ. Wecker has come in at partner level. In truth, he was unlikely to settle for anything else, having previously spent a decade in senior roles at Goldman Sachs in the 1980 and 1990s (latterly as head of Asian derivative trading), has held MD roles at Lehman Brothers and was head of front office transformation at Bridgewater. Nonetheless, a trend is emerging - last week Goldman hired Michael Blum as a partner and head of technology for its electronic trading business from KCG Holdings. Goldman has long described itself as a tech company, in a war for talent with the likes of Google - 47% of its recent job postings were in tech - and now the balance of power is shifting towards the nerds.
Phil Villhauer, the head of trading at Point72 Asset Management, is leaving (NY Times)
José Manuel Barroso: Goldman Sachs: “should not be seen as a political institution. We are a business, a commercial institution. So, I think we should avoid partisan intervention. That’s not what people expect from a firm like Goldman Sachs.” (Financial Times)
J.P. Morgan is getting into ETFs (Portfolio Adviser)
Brevan Howard is launching two new funds after an exodus of investors (Bloomberg)
UK financial services recruitment is "treading water" says Robert Walters (Financial Times)
The stress of an executive MBA (Financial Times)
"Maybe Jamie will fire you. But you will be free to trade in the crypto world." (Business Insider)
"When the waves are great, I go surfing. When it’s chill and fresh, I work. When it’s hot, I go for a swim. When I’m tired, I sleep. When I like a place, I stay. When I meet someone cool, I join them for a while. When my van breaks, I try to get it fixed." (Ruby on Wheels)
Contact for news, tips and comments: firstname.lastname@example.org