Morning Coffee: The new most precarious jobs in banking? J.P Morgan and the STEM students
Maybe James Gorman was right? Back in January, Morgan Stanley's boss cautioned against joining European banks on Wall Street because, he said, they have a history of expanding in the U.S. only to retreat again later. That dynamic may now be playing out at Deutsche Bank.
This time last year, the Financial Times reported that reviving the U.S. investment banking franchise was Deutsche Bank's priority: until 2010, DB was in the top five in America for investment banking revenues, but that crown had slipped and Deutsche was then ninth; the FT said DB was paying above the odds to attract revivifying investment bankers as a result. Sales and trading received similar injections of talent in recent years: Deutsche reportedly hired 100 equities traders across the U.S., Asia and Europe in 2016. 2014 saw an influx of fixed income sales and trading talent. Constrained by the European bonus cap from January 2016, Deutsche invariably paid salaries that were above the market norm.
And now? Now Deutsche is stuck with a capital hungry U.S. business which generates sub-par revenues and has high fixed costs. Long deemed precarious by banking analysts, the franchise appears to be having another wobble: Bloomberg reports that Deutsche is considering more job cuts, with U.S. operations a particular focus. The review is called "Project Columbo", possibly after the U.S. television series where the crime and its perpetrator are shown up-front and the mystery has to be solved backwards. In Deutsche's case, the crime may be expensive expansion in the U.S. without generating concomitant revenues. One way of solving the riddle could be to ask senior DB staff in NY to take a salary cut to keep their jobs. Another could simply be to get rid of some.
Separately, J.P. Morgan is banging the STEM drum. Bloomberg reports that the U.S. bank's Asia Pacific graduate class comprises 39% STEM students - the highest proportion ever (although data only goes back three years).
Deutsche CEO John Cryan sent employees a memo saying he's, "absolutely committed to serving our bank” and that, "“I personally have to give the company direction as we have to rebalance the often conflicting demands of our various stakeholders”. Persons familiar with Deutsche chairman Paul Achleitner said replacing Cryan isn't a foregone conclusion but the board's a bit peeved with the bank's recent performance. (Financial Times)
Deutsche Bank's problem is that the its expansion into investment banking did not come from a position of strength like its peers but, instead, weakness. Because of that, the investment bank was patched together. (ScreamingandShouting)
Paul Achleitner is on vacation right now (creating plenty of time for mischief). (Bloomberg)
Tom Hayes, the ex-UBS and Citi LIBOR trader serving an 11 prison sentence, has been compelled to give up £440k of proceeds from selling his house with which he was hoping to provide for his wife and son. (Financial News)
Morgan Stanley continued to employ a successful broker, even after being informed of his violence towards women. (New York Times)
A study says power posing works. (BPS)
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