Morning Coffee: Deutsche Bank's new job cuts will extend WELL beyond equities. Goldman Sachs partner makes big money in 24 hours.
So, early reports of Deutsche Bank's latest round of job cuts were understated while more recent reports were exaggerated. The reality lies somewhere in between.
In a statement this morning, Deutsche says it has finished its review of the equities business and that it will be cutting 25% of staff there. Overall, the German bank will cut more than 7,000 staff, taking total headcount across the organisation from 97,000 to "well below" 90,000. This is both better than yesterday's intimation that 10,000 staff would go (of whom the Financial Times suggested that 5,000 would disappear from the corporate and investment bank) and worse than initial reports that Deutsche would cut its U.S. business by just 10%.
Ominously, Deutsche Bank's job cuts seem set to take immediate effect: the bank says they're already "underway". And, they're about far more than just equities.
Deutsche Bank doesn't divulge how many people work in its equities business globally. Last year, however, the Wall Street Journal cited insiders who suggested there were around 1,000 in DB's equities front office. If this is correct, the implication is that Deutsche's equities business employs no more than 2,500 people in total (when back and middle office staff are added in). If the bank wants to cut 7,000 people, it's going to need to look well beyond the equities division, therefore.
Deutsche insiders say this is already happening. Some corporate finance teams in London were allegedly dispensed with yesterday. Prime broking staff on the equities periphery are at risk as the bank cuts its prime finance leverage exposure by 25%. Middle and back office staff will be squeezed.
Even in equities, however, Deutsche has its safe spots. The bank says it intends to focus on, "electronic solutions and its most significant clients globally." The German bank's Autobahn electronic trading system needs reinvigorating. Similarly, it's hard to see Deutsche cutting vigorously in flow equity derivatives when Peter Selman, the new head of the equities business globally, hired a new head of flow equity derivatives shortly after joining.
Before there's too much hand-wringing over Deutsche's strategy under Christian Sewing, however, it's worth remembering that we've been here before. Previous CEO John Cryan announced 35,000 job cuts when he took over in 2015. Some of these never happened (Postbank's 15,000 jobs were never cut as the bank was never sold), but some did - Deutsche was particularly vigorous when it came to cutting contractors. Cryan's Deutsche then announced a further 9,000 job cuts including the removal of 17% of equities staff in February 2017. Some of these again never happened (Deutsche's corporate and investment bank gained rather than lost staff last year), but the intention was clear.
Deutsche is practicising the art of death by a thousand cuts. Staff who survive Sewing may well be safe, but it could be unwise to spend too much of last year's bonus for the foreseeable future.
Separately, Goldman Sachs' new favourite person should be its partner David Casner. Casner runs flow equity derivatives for the firm. CNBC reports that his division made $200m in a single day in the first quarter, thereby helping to hike Goldman's equities revenues 38% year-on-year. Last year, Goldman only managed to exceed $100m in revenues on four days in total. The success of Casner and his team was the result of client demand for exposure to the VIX index, which surged by over 100% on a single day in February.
Barclays and Standard Chartered don't overlap precisely because each has bailed out of areas where the other is more focused: Standard Chartered is still very busy in Africa and emerging markets; Barclays is still very busy in equities. (WSJ)
"Barclays would have to offer a pretty material premium to Standard Chartered shareholders, which they cannot afford, given the limited synergies available and the likely hike in end-state capital requirements that would result." (Financial News)
"One top 10 Barclays shareholder said a deal with StanChart could create “another HSBC” by combining strong positions in western and emerging markets." (Financial Times)
Wells Fargo's new head of municipal bond trading, Stratford Shields, is sacking people and hiring in former colleagues from Morgan Stanley. (Bloomberg)
Standard Chartered fired a 23 year-old junior banker who was leading a right wing party in Britain that espouses ethnic cleansing. (CityAm)
Marble Arch Investments LP, a $2.4 billion New York hedge fund, said it is closing down. "They’ve found it harder and harder to find shorts that work.” (WSJ)
Richness is $25m in investable assets. (Bloomberg)
Jamie Dimon: "I've always said family first, country second, JPMorgan literally last. "Without your family and the support of your family and what you learn from them in the good times and the tough times ... you may not have a great life." (CNBC)
Have a confidential story, tip, or comment you’d like to share? Contact: email@example.com
Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libelous (in which case it won’t.)