Morning Coffee: This is what bankers used to have for lunch, and night terrors for the Barclays bankers on £1m+ salaries
The cut-off age seems to be about 50. - If you’re younger than that, you probably have to ask your older co-workers what a long boozy working lunch was like, but If you're aged 50+ you probably remember them a mixture of nostalgia and incredulity that anything of the sort was ever allowed. John Moulton (formerly of Alchemy Partners, more recently of Better Capital and a very profitable family office) has been reminiscing in an interview about extraordinary blowouts with the head of credit at Midland Bank (now part of HSBC).
“We were out at about noon and were served sherry followed by a three-course meal — pretty heavy duty. White wine, red wine and then brandy afterwards. We are now at three o’clock and Mr head of credit went off to his credit committee”.
You have to wonder what sort of loans were approved that afternoon. Moulton agrees that the level of technical competence in finance has improved greatly as a result of more demanding standards, a more diverse hiring pool and keeping the alcohol consumption under control during market hours. But he suggests that some things have also been lost – it’s not just a matter of banking getting to be less fun than it used to be, although according to him that has happened. There used to be “social pressures” on people to behave in line with the overall culture, and those who failed to “agree with things and get on with it” would be ostracized and edged out of the industry. It’s harder to maintain team spirit and a sense of collective identity in a world where “all you get is fifty minutes and an undersized piece of meat and some water”.
Of course, some of Mr Moulton’s nostalgia for the old days might be related to his specific private equity investing style. The ideal turnaround investment, according to him, is “a company run by an idiot in a decent business.” In this kind of gentleman's club environment where boozy mediocrities were tolerated because they didn’t rock the boat and their faces were a fit, it was probably easier to find opportunities because all that needed to be done was to “replace the idiot, sort out the finances and turn the company around.” These things aren't so simple now.
Separately, the trial for fraud of four Barclays executives underscores how much the culture of the City of London has changed. At the height of the financial crisis, with the bank on the edge of survival and the whole system falling apart, telephone records reveal that the bankers’ main concern was for ... their own bonuses. Roger Jenkins (who'd earned £39.5m/$52m the year before) summed up the general tenor of the conversations pretty succinctly; “At two o’clock in the morning I was panicking that we were about to get nationalized and you guys must have been the same because the government wouldn’t look kindly on compensation over a million dollars”.
In many ways, this is a slightly strange trial to be having ten years after the event. Of all the big domestic UK banks, Barclays was the only one which managed to avoid nationalisation. And now the executives who put together the capital issue which saved the British taxpayer the trouble of bailing out four banks rather than three might end up going to jail for it, while the top management of HBOS, Lloyds and RBS have not faced any charges.
The trouble is that everyone involved in the deal was conscious of the fact that the commissions paid to key figures in the Qatari government who facilitated the sovereign wealth fund’s investment in Barclays might look like what their chief FIG banker, Richard Boath, referred to as “a word I hate to use ... begins with B”. Boath’s email trail ends in the way that you often see in this type of trial; with a request to take things offline as the nervousness grows about how things might look at a later date. “When I put that on my screen and I read it, I sort of start to tremble," he wrote. "I’d really like to go and do something about it, so I can sleep”. Which he presumably did, only to wake up screaming at 2am after a nightmare about his bonus.
The “fit and proper” certification required by the FCA means that finance may become less hospitable to alcoholics (Financial News)
Jes Staley might be permitted a sarcastic chuckle on finding out how badly the FCA handles its own whistleblower inquiries. As well as accidentally sending a whistleblower message to its subject, the internal inquiry was exceptionally badly handled, with a member of staff given “a severe and private bollocking” for raising concerns that this might have been a mistake. (Times)
Bucking the trend in hedge fund startups, Desmond How (formerly of the Nomura prop desk) has managed to launch a new fund, investing long/short in emerging market credit. The anchor investors are Tencent and Hillhouse Capital (Bloomberg)
Worried about false accusations of sex discrimination? Why not commit actual sex discrimination! This curious logic seems to be catching on among male executives at Davos, many of whom have given up mentoring female colleagues, or even begun to follow the “Mike Pence Rule” of never having dinner alone with a women other than their wife. (NYT)
The joke in Swiss banking always used to be that due to demographics and longevity, every year the client base “got older and more female”. The first part of this seems to have reversed in the USA as UHNWIs are (on an average rather than individual basis, with the possible exception of Peter Thiel) getting younger. It seems to be mainly driven by inheritance rather than startups (Bloomberg)
Andreas Treichl of Erste Bank mischieviously suggests that Deutsche should merge with the Sparkassen (Welt/Bloomberg)
Georges Elhedery has been promoted to Global Head of Markets at HSBC, coming back from running the MENA operations in Dubai (FT)
Man Group have grown tired of literary types failing to appreciate the hedge fund industry, so the Booker Prize Foundation needs to find another sponsor (BBC)
It’s not just the investment bank – bonuses may be down 20% in UBS Wealth (Bloomberg)
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