Morning Coffee: What it really feels like when you burn out as a banker. Morgan Stanley raises the bonus pool

With the nights at their longest and the mornings at their darkest, this time of year has many bankers feeling the stress even more than usual, particularly if deal timetables or market volatility mean they’re not getting much of a break. The Weekend FT had a long piece on how to avoid burn-out at this time of year, written by Josh Cohen, a literature professor and psychoanalyst. One of the case studies he wrote about was of a young banker who found that one day, when the alarm went off at 5.30am, he didn’t get up for the office as usual, but spent six hours in bed before heading off to the supermarket to start binge-eating comfort food.

“Chris” (not his real name, and several other characteristics might have been anonymized) came to see the therapist a few months later, overweight and clearly not taking good care of himself.  He proceeded to rattle off a set of practically textbook symptoms and causes of a stress-induced nervous breakdown. A spectacular early record of success, with top universities, sporting achievements and recruitment out of business school into a prestigious position.  Promotions and bonuses, leading to a work regime of 90-hour weeks.  And then gradual drift into spending hours gazing semi-consciously at a screen, anxiety sweats and detached conversations, followed by the (literal and metaphorical) five-thirty wake-up call.

What seems to have gone wrong for Chris in this story is that he had never really known what he wanted, so he was never going to know what was enough to achieve it.  Like many bankers who burn out (and, it’s fair to say, many at the top levels who don’t), he was entirely motivated by external measures and status.  The eventual crisis was triggered by his body and mind giving up under the pressure, but the underlying cause was the same thing that drove him to the doughnut shop – something inside him was demanding to be fed.  He only started getting better when he began to realize that he needed to choose his own directions; as he said, “for the first time in my goddamn life, I took a walk without knowing where I was going”.

One of the early signs that a banker is heading for burn-out is when they’re described by colleagues as “taking it all a little bit too seriously”.  The advice from Josh Cohen is to avoid that kind of attitude; embrace aimless activities and keep some space for things that are just pleasant, rather than having some external purpose.  The investment banking industry is always going to give you opportunities to damage yourself; the secret is make sure you don’t get to a place where you feel you have to take them all.

Separately, Christmas might be a little sweeter at Morgan Stanley this year, as the investment banking division comes to the end of a year in which it has outperformed rivals, delivering 17% revenue growth for the first three quarters.  As is often the case these days, the majority of that revenue growth is going to be taken by shareholders rather than employees. The bonus pool is expected, according to “a person familiar with the matter” to be up “low to mid single digits”.  Although this doesn’t sound like such a great deal compared to the good old days, it should be substantially better than the Street average; Options Group are expecting overall flat pools, with Equities Sales & Trading up slightly and Fixed Income S&T down slightly.

The Bloomberg report notes that junior bankers at Stanley might expect a larger share of the pool this year. Morgan Stanley has already said that it will be increasing pay for associates by as much as 25% and promising them quicker promotions. Personal experience suggests that knowing what the overall pool has done is surprisingly little use in forecasting your own prospects, but this is a little bit of good news in an otherwise somewhat bleak year-end environment.

Meanwhile...

Tales of skinny-dipping involving partners and juniors at Goldman in the 1990s, among other titbits in this profile of Tim Leissner, the banker at the heart of the 1MDB scandal.  The picture it gives is an all too familiar one of a “the mountains are high and the Emperor is far away” compliance culture of a profitable but geographically remote business unit, which revels in its lack of direct supervision from head office.  Goldman did actually send the guys in grey suits round after the skinny-dipping party in 1998, but Leissner was still able to get a reputation for having affairs with executives and corporate clients (and the family members of Malaysian politicians), and was indulged because he was bringing in the deals.  (Financial Times)

The US financial system goes into “season finale” mode over the rumours that President Trump is considering firing Jerome Powell from the Fed.  Steve Mnuchin has had a phone call with all the bank CEOs to ask about liquidity, and published a press release which is not providing the reassurance it presumably intended (Bloomberg)

Bob Diamond did “Lunch with the FT” and explains the rationale behind his post-Barclays deals – they’re all in areas which are no longer profitable for banks because of the regulatory capital requirements.  Also interestingly, he has basically no regrets with respect to BarCap and would happily buy the former Lehman investment banking operations if they ever came up for sale (FT)

A review of the best and worst forecasts made by the sell side for 2018, as a useful corrective now that everyone’s making their 2019 predictions (Financial News)

Once upon a time Stuart Bray handled tax-efficient transactions for Banker’s Trust.  Then he sued Deutsche Bank for libel over a press release they sent out when they made a provision for some IRS litigation and settled for £20m. He used the money to set up a tiger breeding charity in South Africa ... which a UK judge has now suggested he might have used to hide assets in a divorce. (Business Day)

Xavier Rolet, former LSE chief executive, is now going to be running CQS (Reuters)

Abdulaziz bin Hassan, the CEO of Credit Suisse Saudi Arabia, has resigned and will leave in the new year.  Not clear why, as the bank is hiring in the region and building up rather than cutting (Bloomberg)

Although sales & trading revenues seem to be holding up, Q4 has been really disappointing for M&A volumes ... (FT)

...although teams which have managed to get a hand in the series of consumer healthcare deals may have bucked this trend (Financial News)

Boring, underpowered and ugly.  No, not your managing director; the Bloomberg review of the year’s worst luxury cars (FT)

Merry Christmas! This is our last newsletter until a brief return on December 31st and a full return in early January (3rd). Wishing all our readers a very pleasant and very rejuvenating break with family and friends! 

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