Morning Coffee: What UBS does when it’s desperate to keep you, and Deutsche Bank’s top franchise is back in the game
An apology: Yesterday’s Morning Coffee stated that Deutsche Bank is hiring 50 managing directors and attributed this claim to recruitment firm Options Group. This was incorrect. The claim came from Financial News, which derived the information from unnamed sources. We would like to apologize to Options Group for our mistake.
You might have got the impression from some of the things said in the immediate aftermath of Andrea Orcel’s departure that UBS didn’t really like him. In fact, nothing could be further from the truth. Bilanz magazine (euphemistically described as “traditionally used by people close to UBS management to air their views”) has details of the counter-offer, and it’s clear that the Swiss really, really wanted to hang on to their head of investment banking. They offered to publicly nominate him to be the successor to Sergio Ermotti, and to position him as the man to revitalise UBS’ business, raise returns on equity and get the share price back up.
But there was a stick along with the carrot. Famously, UBS refused to make any “good leaver” concessions with respect to the $50m of deferred compensation to which Mr Orcel would have been entitled. They made it clear that if he left he could never, ever come back. And (more surprisingly), they refused to give an inch with respect to the six months’ contractual notice period, despite the fact that Santander was hardly a direct competitor and had in fact been one of UBS Investment Banking’s biggest fee paying clients. In many ways, it was this delay which caused the whole move to fall apart, as it allowed time for Santander’s management to develop cold feet and to worry about the size Orcel’s pay package.
The problem for UBS was that Orcel's specific departure highlighted an issue of succession planning. After Juerg Zeltner departed, bank lacked an obvious successor to Ermotti; if Orcel had gone too – and as an Italian in a Swiss bank with an incumbent CEO with a contract out past Orcel’s 59thbirthday, he might at any time – UBS would be in an awkward position. Bilanz said Ermotti himself was more amenable to the Santander proposal than the board and, while this might have been mainly motivated by generosity to an old friend and protégé, it’s a rare CEO who doesn’t have mixed feelings about the departure of an alternative candidate.
But Orcel's departure also had wider implicatoins. As Bilanz reports, the board concerned not to set a precedent. The “bid back” situation for a valued employee with a better offer elsewhere is one of the most difficult things to manage in banking. You want to minimise staff turnover and keep your franchise players, but you don’t want to reward disloyalty, and you certainly don’t want to create the impression that the way to get paid up and promoted (or to knock out any rivals for the top job) is to threaten to leave. From the employee’s point of view, the conventional wisdom is that it’s best to ignore a counter-offer unless it’s absolutely sensational – you might get the promotion in the short term, but the bad feeling created can last for years and do plenty of long term career damage.
So did UBS play it right? They lost their man. But, they managed to send a strong message up and down the organisation that there are no special cases and that however much they love you, if you dally with leaving, you are dead to them. They also seem to have passed on most of the blame (and legal risk) to Santander. I doubt the board will think they handled this difficult negotiation all that badly.
Elsewhere, some really good news for Deutsche Bank; they are back to second place in the market share league table for global FX trading, up from 8th last year and back to number one in their home market of Western Europe. This had always been a core franchise for Deutsche, and its decline from the totally dominant position it held in 2009-10 was a really clear indicator of problems at the firm overall. It’s not known whether the recovery in league table placings will be borne out in revenues, but it has to be good for marketing and for internal morale to see that Deutsche’s position is not irrecoverable. Of course, this makes Amadeo Ferri-Ricci’s departure harder to understand.
More evidence that Deutsche Bank isn’t completely out; they’ve hired two MDs from Credit Suisse in the wealth management arm (Finews)
But Deutsche are threatening to “fire” as many as 1,000 clients who haven’t filled in the correct know-your-customer paperwork. Clients including some surprisingly big and prestigious hedge funds have been given “termination notices” and told that they won’t be allowed to use Deutsche’s payment services unless they get their act together (FT)
More confirmation from Morgan Stanley and Citigroup that Q2 trading revenues have been disappointing (Bloomberg)
Buttock-grabbing and stalking in the London insurance market, as a number of complaints come to light after the recent revelations (Bloomberg)
The US lawyer who specialises in harassment, stalking and revenge porn cases talks about stiletto heels and how she built her specialised practice (The Cut)
If your firm has given confidential market and trading data to the CFTC in order to help in one of its investigations, that data is being stored on an “antiquated” system that’s regarded by the general inspector’s office as more or less an invitation to hackers. (Bloomberg)
Euromoney is interviewing CEOs about their agenda – Brian Moynihan of BoA sees little threat from European competition and thinks his trading businesses are more stable than they’re given credit for (Euromoney)
Jean-Laurent Bonnafé of BNP Paribas, on the other hand, thinks that history moves in cycles, and that European banks aren’t being given credit for the improvements of the last ten years (Euromoney)
Listening to music that you like helps reduce stress when faced with challenging tasks. Break out the power ballads before your next interview! (PLOS One)
It’s not just banking – psychologists have observed dominance-based hierarchies completely unrelated to task-specific ability in groups of all sorts, from chess clubs to the Falmouth Sea Shanty Singers (BPS Digest)
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