Morning Coffee: A rough day for traders at Goldman Sachs and J.P. Morgan. Hedge fund managers return from the ashes
Thursday wasn’t exactly a banner day for traders at Goldman Sachs and J.P. Morgan but for very different reasons. A management shakeup at Goldman has left the bank’s once dominant securities division without a seat at the big table, while J.P. Morgan let it be known that its traders are trudging through a difficult quarter. Meanwhile, dealmakers at each firm have no reason to fret.
Incoming Goldman Sachs CEO David Solomon made investment banking co-head John Waldron the firm’s next president and chief operating officer. A former investment banker himself, Solomon has carved out the two most powerful roles at Goldman for dealmakers. Meanwhile, nearly all the traders that lorded over the bank alongside outgoing chief executive Lloyd Blankfein – a former trader in his own right – have been pushed out of the top jobs at Goldman Sachs.
As part of the reorganization, chief financial officer Martin Chavez will return to the trading division as a co-head after only 18 months on the job following reports that some investors felt he wasn’t growing into the role. Consumer banking chief Stephen Scherr, the former COO of Goldman’s investment banking division, will take his place. While the securities unit will remain a key component of the bank’s overall operations, traders at Goldman have seen their influence at the top rung of management nearly all but disappear. Former investment bankers now run Goldman Sachs.
Meanwhile, J.P. Morgan on Thursday warned that trading revenue for the third quarter will decline year-on-year. CFO Marianne Lake said she expects a “mid-single” digit decrease. The news comes a day after Citi CFO John Gerspach said the bank's third quarter markets revenue will likely be flat to slightly up compared to a year ago. To pour salt in the wound, Lake said that the firm’s other business lines, including investment banking, are looking strong.
Elsewhere, the co-founders of shuttered hedge fund Diamondback Capital Management are reportedly putting the band back together. Richard Schimel and Lawrence Sapanski are planning to launch a new, yet-to-be-named New York hedge fund with at least $500 million in assets, according to the Wall Street Journal.
Schimel and Sapanski closed the $6 billion fund in 2013 after the FBI raided Diamondback and eventually charged portfolio manager Todd Newman with insider trading. Diamondback entered a non-prosecution agreement and agreed to pay $9 million in disgorgement and penalties, though the firm wasn’t accused of any wrongdoing. However, the case was vacated and the money was returned in 2016 after an appeals court overturned Newman’s conviction. It was too little, too late for Diamondback, though Schimel and Sapanski are now playing on a clean slate.
You knew it was coming. One day after J.P. Morgan CEO Jamie Dimon said he was smarter than President Trump and could beat him in an election, Trump returned fire. “The problem with banker Jamie Dimon running for President is that he doesn’t have the aptitude or 'smarts' & is a poor public speaker & nervous mess - otherwise he is wonderful,” Trump tweeted. (CBS News)
Goldman Sachs has reached a settlement with a whistleblower who was fired for his ill-treatment of his superiors and his "aggressive and insubordinate" conduct in a meeting to discuss his behavior. The disciplinary process for London-based Sherjeel Aman reportedly occurred a week after he reached out to the Financial Conduct Authority, claiming the bank was misleading the regulator. Goldman agreed to pay Aman roughly $118k. (Bloomberg)
Count Morgan Stanley as the latest bank to dip its toe into cryptocurrency without taking the full plunge. The firm plans to offer clients synthetic exposure to the performance of Bitcoin through complex derivatives but does not plan to trade cryptocurrency directly. Goldman Sachs is also exploring the Bitcoin derivatives market but has reportedly backed off plans to open a crypto trading desk. (Bloomberg)
Deutsche Bank is elevating 20-year vet Stephan Wilken to the head of anti-financial crime and chief of anti-money-laundering. Wilken will replace Philippe Vollot, who has agreed to become the chief compliance officer at Danske Bank. (WSJ)
J.P. Morgan poached its latest recruit from a rather unusual source: Starbucks. Leanne Fremar, the bank’s new chief brand officer, was the executive creative director at the coffee chain giant. (Adweek)
If you’ve ever listened to a quarterly earnings call, the chances are good you were hearing from a man. A study of more than 155,000 company conference calls over the past 19 years found that men talked for 92% of the time, despite the fact that female analysts, executives and investor relations staff made up well more than 8% of call participants. One theory is that men tend to drone on and on. (Bloomberg)
While blockchain may be one of the hottest buzzwords in banking technology, firms are prioritizing investments in artificial intelligence, big data and cloud computing over projects involving blockchain, according to a new study. Most banks are taking a wait-and-see approach. (Trade News)
Pimco paid its 12 European directors more than $40 million in 2017, up 29% from the previous year. The asset manager’s flagship European fund broke records last year. (Financial News)
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