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Morning Coffee: Nomura’s latest expansion goes into reverse with mass layoffs. Should investment bankers respect their elders?

“Here For A Good Time, Not For A Long Time”. The recent announcement that 50 posts at Nomura have been put at risk should remind us that the old T-shirt slogan can apply to markets jobs as well as to bikers and spring break students. It appears that some of the names on the list to be laid off include senior traders who were recruited comparatively recently. Omar Ghalloudi, for example, was only hired in 2017 (from Citigroup, where he was head of investment grade trading). He’s not the only recent hire from Citi to be leaving, either – Fred Jallot left in June, after less than a year.

When senior hires don’t last long, it’s not always a sign of anything deep seated – sometimes people’s faces just don’t fit, or their personal style fails to find a way to work with a new institutional culture. Nomura also had of a reputation for paying very well for people that it decided it really wanted (it even showed up in an Emolument survey as the best paying bank in London), and typically that sort of deal comes with some ambitious targets attached to it. If someone isn’t happy in a role, or if the franchise isn’t developing in the way that was envisaged, it’s often a lot better for all concerned to chalk it up to experience and part ways once more, rather than struggle on in denial.

That said, the turnarounds at Nomura have been quite noticeable. After building an equities business in the years to 2015, the Japanese bank pulled out of equities in 2016. It then built a proprietary trading operation, which subsequently closed down its proprietary trading operation. 2017 was all about emerging markets hiring, but the latest cuts include staff from the emerging markets desk along with some of their peers.

The fundamental problem Nomura appears to have had in London is that it wasn’t making money, which is always bad for employment prospects. The prop desk was closed down after some large losses, while the overall fixed income trading operation did not seem to be generating the revenues it needed to cover its cost base. There are also suggestions of surprise losses and compliance issues, all of which might have stood out when top management back in Tokyo were looking at half-year budgets.

Does this mean that Nomura was wrong to make so many expensive hires, or that people were wrong to join? Not really. Like everything else in markets jobs, it’s a risk versus return calculation. Joining an ambitious foreign player from a seat in a bulge bracket firm is always a decision that people make with their eyes open – if it goes well, you can get very rich and leapfrog a few steps up the promotion ladder. If it doesn’t, then in the modern world of investment banking you can no longer expect the overseas office to keep paying the bills. There will always be people willing to take the risk, simply because, as that t-shirt slogan reminds us, sometimes there are more interesting things in the world than career longevity.

Separately, in the more genteel world of investment banking, Javier Oficialdegui at UBS is looking out for 40-to-50-year old bankers, with continuity and relationships built up over the course of a career. The head of European investment banking thinks that these grey heads are undervalued in the industry , relative to energetic younger bankers. His strategy, according to his interview with Financial News, is to keep the older guys making deals, rather than putting them on a path into managing teams. In this way, UBS aims to compensate for the fact that it’s no longer able to bring a balance sheet.

Jefferies, for its part, conveys a similar message in a recent all-staff letter, but in a characteristically American way. At first glance, “Please Disrespect Your Senior Management Team” looks like a call to disruptive behaviour and valuing the exuberance of youth. But on reading the letter in detail, CEO Rich Handler is asking younger employees to “disrespect” the management by asking their advice and involving them in deals, rather than holding back from doing so out of concern for time and seniority. The common theme seems to be that, as Jeffries says, “You need to stay engaged in the trenches regardless of your length of service, history of success or job title”.


Karen Miles has been promoted to head of European high yield strategy at Credit Suisse. (Financial News)

UBS has created a 3D scan of its chief economist and linked it to a database of things he might say, to create a “digital avatar”. (AFR)

Panos Stergiou becomes head of institutional clients at Deutsche Bank fixed income, as part of a series of promotions. (Financial News)

Citigroup, possibly acting on the advice of Sherlock Holmes, say that traders are distracted during World Cup matches. (Financial Times)

The senior banker fired from BoA after #MeToo allegations is fighting back, suing for defamation and for his bonus. (CNBC)

Participation in some telecoms and media megadeals has pushed Robey Warshaw to the top of the M&A league tables, despite it being a boutique with only three partners. (Business Insider)

Everyone’s moving out of London. (Financial Times)

SocGen buys some commodity and equity trading businesses from Commerzbank, but not the cash equities brokerage. (Reuters, background in Les Echos)

App developers apparently have access to your Gmail account. (WSJ)

Bridgewater and Winton have registered to sell funds in China – this is a use-it-or-lose it authorisation which requires them to do something within six months. (Reuters)

Uday Furtado, a co-head of Southeast Asia at Goldman Sachs, has left for an ECM role at Citi. (Reuters)

Image credit: Herianus, Getty

AUTHORDaniel Davies Insider Comment

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