Morning Coffee: Why Bank of America's best bankers are leaving. Don't count on your daddy to get you a banking job
Bank of America and its top executives still have bruises from the financial crisis that have yet to heal. While other U.S. banks are pushing forward with aggressive deal-making, Bank of America is reportedly easing off the pedal for fear of past consequences. Senior bankers who feel they’re being restricted with undue red tape have apparently reached a breaking point and are leaving for firms that are more willing to take risks.
The nexus of the issue reportedly stems from a mix of the continued fallout from the financial crisis and the $300 million that Bank of America lost in December from its dealings with South African furniture maker Steinhoff International. Bankers told Bloomberg that the firm is now scrapping “years-long” plans to expand key lines of business within its investment bank. Those working in advisory and margin lending say they are losing business as the bank’s risk managers scrutinize every aspect of a potential deal, including reputational risk, according to the report. Getting approval for potentially lucrative emerging-market deals has been particularly difficult in recent months.
The anonymous bankers not only paint a picture of a firm reigning in risk-taking, but also one that may be sitting on its hands for too long. Executives reportedly squabbled over who would replace A.J. Murphy as the head of capital markets for a full five weeks before seemingly sitting on the fence and hiring two co-heads with opposing backgrounds.
While Bank of America played down the reported change in strategy, some recent numbers are revealing. The firm saw its advisory revenue drop 27% during the first quarter while emerging-market debt sales have dried up following an internal probe into the failed Steinhoff deal. At least 14 managing directors – including 10 in the U.S. alone – have left Bank of America as of mid-May, with many eyeing a more aggressive culture, according to Bloomberg.
Elsewhere, another firm has been thwapped on the knuckles for reportedly hiring friends and family of potential prospects to win business. Credit Suisse has agreed to pay $47 million to end a probe into whether it hired referrals from government employees in Asia in exchange for contracts and other benefits. J.P. Morgan agreed to pay $264 million to settle similar allegations in 2016, while Deutsche Bank acknowledged in its annual report that it is being investigated for its recruitment practices. J.P. Morgan made particularly splashy headlines by once hiring the son of a Chinese government official that internal recruiters called “the worst BA candidate they had ever seen.”
Goldman Sachs and Morgan Stanley are bracing to take more trading risks as the Trump administration eases mandates associated with the current Volcker Rule. (CNBC)
Deutsche Bank has reportedly had talks with top shareholders about potentially merging with German rival Commerzbank. (Bloomberg)
BlackRock’s largest hedge fund has lost two of its deputy chief investment officers and several other senior fund managers over the last several months. (Bloomberg)
There are no industry-wide “systematic issues” similar to the Wells Fargo scandal where employees opened fake customer accounts. Regulators say it’s an issue particular to the bank. (WSJ)
Cryptocurrency could one day take over the U.S. dollar’s role as the world’s reserve currency, according to Lazard CEO Ken Jacobs. (Yahoo Finance)
Famed trader Greg Coffey’s star may have lost a bit of its shine during his six years in retirement. Several former backers have decided not to reinvest their money in Coffey’s new hedge fund. (Financial News)
A former Deutsche Bank trader once made a “ridiculous” request for colleagues to submit a much higher interest rate than what was originally proposed, according to an email read during the Euribor rate-rigging trial. The rate was submitted anyway. (Bloomberg)
Jamie Dimon and Warren Buffett co-authored an op-ed for the Wall Street Journal in which they argued that public companies should eliminate quarterly earnings guidance as it makes executives think too much about the short-term. (WSJ)
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