Morning Coffee: The 60 bankers who are having the most miserable 2019. Wall Street’s grossest scandal
While a number of banks posted somewhat uninspiring earnings over the last two weeks, Nomura delivered perhaps the bleakest results, recording its first annual loss since the financial crisis. The rough quarter portends bad news for anyone working at the Japanese bank, but there are several dozen high-ranking Nomura bankers that just got a stocking full of coal.
In a rare move, Nomura said it will not be paying bonuses to roughly 60 executives, including senior managing directors whose pay packages are buoyed primarily by year-end awards. (Unlike most other banks, Nomura’s fiscal year ends in March.) The biggest pain point in the fourth quarter involved the same business that the bank is targeting as part of its $1 billion cost-savings plan announced earlier this month. Nomura’s wholesale unit, which includes investment banking and sales and trading, posted a $116 million loss compared to a $396 million gain a year ago. Its global markets revenue fell 37% year-on-year in what was far and away the worst trading performance among major investment banks. The next closest was Goldman Sachs, which saw its trading revenue fall 18% during its most recent quarter.
Nomura has already cut more than 100 trading jobs in Europe and the U.S., but further actions are surely imminent. The bank’s overseas operations have now lost money for a fifth consecutive quarter, according to Bloomberg. All things considered, the 60 directors who aren’t receiving bonuses may actually be some of the lucky ones. They’re still employed – at least for now.
Meanwhile, CEO Koji Nagai was quick to dismiss questions over whether Nomura would consider merging with another bank to better compete outside of its home market. He said the firm would begin to hone in on less volatile “client-focused” businesses, such as advisory. However, cutting the fat seems to be the immediate priority. “What we are saying is, let’s remove our old clothes and put on something that matches the new era,” Nagai said. “What we do in our new clothes is something that we should tackle later.” If you’re a trader at Nomura, wear several layers.
Elsewhere, a former junk bond saleswoman at Cantor Fitzgerald who is suing the firm for harassment, discrimination and retaliation has received the greenlight from a New Jersey judge to take her fight to court, rather than being sent to arbitration. Sadly, that news wasn’t the headline-grabber. Lee Stowell told Bloomberg that in August of 2016 she couldn’t find her coffee mug that was adorned with the face of democrat Bernie Sanders. When it appeared in the kitchen cabinet at Cantor’s Summit, N.J. office, Stowell discovered that the mug wasn’t empty. “I looked in – there was feces in it.”
Stowell reported the incident, along with other alleged patterns of abuse, but said her complaints were cast aside. She was later dismissed in a round of layoffs and eventually filed suit against the firm, which has denied her accusations. With the judge rejecting Cantor Fitzgerald’s request for arbitration, Stowell will be able to sue the firm in open court where she’ll have much more leverage (though the bank has appealed the arbitration decision). As for the mug, Stowell said she cleaned it out and eventually used it again to show her colleagues she was unfazed. “I wasn’t going to give in to them,” she told Bloomberg.
With merger talks with Commerzbank officially dead, Deutsche Bank may be forced to make another round of cuts within its investment bank, shutter some businesses and raise additional capital. (WSJ)
As if it weren’t having enough problems, Deutsche Bank has also been fined $500k for claiming in marketing materials that it relied on an in-house research group to evaluate hedge funds for wealth management clients. The bank failed to acknowledge that it only assessed hedge funds that agreed to share management fees with the firm. (Bloomberg)
As expected, Barclays cut bonuses for investment bankers in the first quarter as profits sunk. Barclays said that additional cost cuts could come if tough trading conditions continue. (The Guardian)
The first quarter of 2019 wasn’t a particularly good one for UBS, but it also wasn’t the nightmare start to the year that Chief Executive Sergio Ermotti had earlier suggested. Pre-tax profits at UBS’s investment bank were down 64% year-on-year, yet the firm still beat expectations. In March, Ermotti made headlines by calling Q1 “one of the worst first-quarter environments in recent history.” (Financial News)
Royal Bank of Scotland CEO Ross McEwan will step down from his role within the next year. While the bank has hired a search firm to amass a list of candidates, RBS lifer Alison Rose, head of British commercial and private banking, is considered one of the early favorites for the role. (Bloomberg)
John Cryan has resurfaced roughly one year after he was ousted as Deutsche Bank’s CEO. He’s a director at an eight-person cyber security firm known as X Cyber Group, where he is likely facing less pressure than his successor at Deutsche Bank, Christian Sewing. (Bloomberg)
UBS is wedding its investment bank and wealth management units in the U.S. in an effort to do more cross-selling and increase dealmaking. (Bloomberg)
U.S. regulators have interviewed dozens of bankers to potentially serve as board members or executives at banks if they fail and need to be seized by the government. (WSJ)
Forget ping-pong tables and free snacks. The latest generation of employees is seeking upgraded restroom facilities, and they’re starting to get their wish. Floor-to-ceiling stall doors, nightclub-worthy low lighting and microencapsulated fragrance oils are becoming table stakes. (WSJ)
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