Morning Coffee: Fear as 2019 begins with job cuts across major firms. Bored IPO bankers

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All the damage that was done during a historically volatile December is beginning to rear its ugly head in the new year. Market turmoil and political uncertainty in the U.S. and the U.K. are taking a real toll on banks and other large financial firms, which are seemingly lining up all at once to make headcount reductions. And this may only be the beginning.

The headliner is BlackRock, which is set to eliminate roughly 500 jobs in the coming weeks as market uncertainty has investors fleeing to low-cost index funds and even cash. Fellow asset manager State Street began cutting 15% of its senior management beginning on Wednesday. Then there’s Morgan Stanley, which is reportedly letting go “dozens” of employees within its sales and trading division across fixed income and equities. Meanwhile, Nomura and Banco Santander are starting to cut jobs in Europe.

Suffering through a particularly brutal December stretch, hedge funds are also feeling the pinch. Famed quant fund AQR Capital Management acknowledged this week that it too will be scaling back headcount after its most difficult year since the crisis. Bloomberg is reporting that “a low single-digit percentage” of the workforce will be cut. While they may not make headlines, smaller hedge funds that experienced double-digit losses in 2018 will likely follow suit.

Of course, the timing of all these moves isn’t exactly random. Yes, December was a particularly rough month for the markets. But cutting staff in January makes it likely that at least some firms won’t have to pay out bonuses to those who are caught in the wake. There will be a lot of white-knuckling happening over the next few weeks for anyone whose job revolves around financial markets.

Elsewhere, one underreported consequence of the government shutdown in the U.S. is the partial closure of the Securities and Exchange Commission. Soon-to-be public companies and their bankers are having to push back IPO plans because many regulators who would review the filings aren’t at their desks. In previous shutdowns, the SEC had enough cash stowed away to remain open. This time around, their surplus has been tapped, according to the Wall Street Journal. That spells bad news for capital markets bankers who haven’t seen much action since November.


A Norwegian power trader who racked up more than $115 million in losses last year on Nasdaq’s exchange reportedly had other people enter trades for him despite having only a personal membership. Einar Aas was expelled from the exchange in September after he couldn’t make good on the losses. Now Nasdaq is in the crosshairs of regulators for its perceived lack of oversight. (Bloomberg)

Investment bank Perella Weinberg is shuffling its senior leadership ahead of its planned IPO. Co-founder Peter Weinberg will take over as CEO while former Treasury official Bob Steel will be named chairman. However, the biggest hurdle facing the company is how it will redistribute equity between older and newer partners before going public. Those should be interesting discussions. (Bloomberg)

Bloomberg surpassed $10 billion in revenue during 2018 as it continues to add new sources of revenue outside of its terminal business. The revenue milestone will result in bonus payments for long-tenured employees worth tens of thousands of dollars. (Business Insider)

Goldman Sachs plans to add headcount within its Asian prime services team this year. The firm also just hired former Deutsche Bank M&A chief Keisuke Sueyoshi to expand its advisory business in Japan. (Bloomberg)

Despite lackluster returns by some big names, activist hedge funds were quite busy in 2018. A record 226 companies faced activist campaigns last year. The strategy doesn’t seem to be going anywhere. (FT)

Things just keep getting worse for Deutsche Bank. The German lender is being sued as part of a tax evasion scandal, and now an industry watchdog is taking an unorthodox step of setting deadlines for the bank to complete its due diligence on clients. Analysts are also saying that Deutsche Bank likely had a disappointing fourth quarter, particularly in debt capital markets and fixed income sales and trading. This comes on the heels of news that bonuses at Deutsche Bank could drop between 15%-20%. (Bloomberg)

With the federal government shutdown ongoing, President Trump has cancelled his trip to the World Economic Forum in Davos, Switzerland, which annually hosts all the big names in banking and finance. (WSJ)

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