Morning Coffee: The looming Wall Street banker exodus. Barclays' new retention problem

Brexit isn't just about a few thousand trading jobs making their way to continent. It also means that investment banks are questioning the wisdom of keeping jobs in high-cost centres like London, and more roles are gravitating towards cheaper locations. Goldman Sachs, Standard Chartered and J.P. Morgan are already hiring in Poland, for example, and these are everything from risk, technology and quantitative finance roles.

While London's crown wobbles, New York has its own problem potential banker exodus catalyst - tax. The shake-up of the tax system in the U.S., which the Republicans hope will bolster tax revenues, are likely to hit high-tax states like New York hardest. The Tax and Jobs Act, which limit how much total income tax can be deducted against local and state taxes, will result in a big hike for high-earning bankers and fund managers in the Big Apple. Wall Street is starting to react.

As the Financial Times reports, Wall Street bankers and hedge fund managers have found their voices on the issue, and think finance professionals will leave. New York, Connecticut (a centre for hedge fund managers), New Jersey and California are all high tax states. If these tax rises go ahead, bankers could move to cheaper locations.

“While I don’t expect significant job dislocations immediately, over time this will be a major blow to keeping New York City the world’s undisputed financial capital." said Paul Taubman, head of boutique investment bank PJT Partners. The current proposals mean that some high earners could go from paying 50% tax, to somewhere into the mid-50s, said that FT.

There are already some in London fake boohooing about the prospect of bankers going after Brexit, and it's easy to view these protests in New York as the grumbles of the 1%. But Dan Donovan, a Republican congressman whose district serves the Staten Island and south Brooklyn areas of New York City, however, believes it could be catastrophic. "Losing even a small percentage of those households will decimate the state and city tax base,” he said.

Separately, Barclays' bankers are staying put. After a successful hiring freeze in 2016, which resulted in over 13,000 people leaving through attrition, Barclays has been building its investment bank again in 2017. But Barclays is arguably the bank most tied to the UK after Brexit - it has said in the past that just 150 jobs will need to be relocated to Dublin as the UK leave the EU - and staff are reluctant to leave as a result. Going to another bank now is seen as too risky.

Bloomberg reports that Barclays' UK attrition rate has fallen to 8%, and globally just 10% of people left voluntarily in the year to October - down from 12% the year before. CEO Jes Staley has been trying to revive its investment bank, and has been hiring both deal-makers and sales and trading staff - as well as investing more in technology - but investors have become increasingly impatient waiting for the turnaround as the share price continues to slide. The bank has pledged to cut costs by $1.3bn and cutting employees are key to it achieving its target of a return on tangible equity of more than 9% in 2019.

Meanwhile: 

23% of Barclays’ new MDs are women (Financial News)

RBS CEO Ross McEwan: “Businesses like ours have to move forward as though we are not going to get any form of deal that would good for banking.” (Bloomberg)

Two former bankers have set up a shop selling English goods in Luxembourg to capitalise on the influx of financiers (Bloomberg)

Andrea Orcel is not optimistic about 2018 (Reuters)

Shareholders are rallying around LSE chairman Donald Brydon (Sunday Telegraph)

Meet the man creating a merchant bank from scratch (Sunday Times)

“Christmas has come early for financial firms.” (City of London Corporation)

Not all people in finance fear a Corbyn government (Financial Times)

Bank of England could start shifting staff to Birmingham (Financial Times)

The Bitcoin bonus (NY Post)

Bitcoin is an exclusive club (Blomberg)

Trolling Jamie Dimon worked out well for this Bitcoin firm (Business Insider)

“Crazy imaginary internet money” (The Onion)

Meet Håkan Guldkula, the Swede from a tiny village tried his luck on Wall Street, lost it all and then became the investment banker who knows everyone (Business Insider)

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