Morning Coffee: The redundant 50-year-old banker with huge living costs. Deutsche's bad bank could provide jobs for a while
It's the nightmare of anyone who loses their job in finance, whether from Deutsche Bank or elsewhere. How do you find anything that pays a comparable amount and covers your exalted cost of living? It's bad enough if you live in London or New York, where - post Lehman Brothers - bankers were reportedly calling headhunters and asking for "anything that pays $200k+." It's worse if you live in Hong Kong, where the extra-high cost of living makes economising extra-impossible.
Bloomberg cites the case of a 50-year-old 'senior banker' in Hong Kong who finds himself in an untenable position. His children are at school in the territory and his monthly rent is a massive HK$100k ($12.8k). He'd like to stay in HK, but he lost his job at a European bank earlier this year, and he can't find a new one. No one is hiring, or at least they're not hiring senior expats.
It's an issue that's also likely to become a problem for the people laid off by Deutsche Bank in Hong Kong, who can expect to struggle to find jobs in a market already saturated by people ejected from the likes of Nomura.
In many ways, though, Hong Kong bankers' problems simply replicate those faced by bankers elsewhere. Bloomberg speaks to a laid-off British equities trader in the territory who says he's been interviewing for four months with no luck. The only job he came close to getting went to a more junior candidate 10 years younger than himself. Senior bankers the world over will relate.
Of course, there's always the option of economizing. If you're spending $13k a month on rent alone, this should surely be a possibility (given that there are plenty of people surviving long periods of time on that amount). However, economizing tends to be easier if you're living in your home country than in a financial hub where everyone knows you by virtue of your highly paid job. For this reason, periods of retrenchment in finance tend to be associated with a dispersal of redundant bankers back home. In the case of London right now, this is likely to exacerbate the effects of Brexit as seasoned European bankers go to Paris, Frankfurt or Milan in search of new jobs in their home countries, where life is less expensive.
Separately, some bankers who probably won't be going home soon are those working for Deutsche Bank's 'capital resolution unit,' or bad bank. While DB CEO Christian Sewing has said he expects this unit to be closed as soon as possible, early closure looks like wishful thinking.
The International Financing Review notes that Deutsche Bank already set up a sort of bad bank two years ago, when it declared that it was coming clean about €60bn of legacy trades that were losing hundreds of millions of euros a year, including long-dated derivatives from the financial crisis. As of last week, DB has declared that it has another €79bn of similar trades, which are now being lumped into the €288bn portfolio of Deutsche's bad bank.
The IFRE notes that closing the bad bank in a short time period seems optimistic. It's not clear who will want to buy Deutsche's dirty assets, which seemingly include the sorts of 'uncollateralised bilateral transactions that are heavily penalised under new capital rules.' Revealingly, the IFRE notes that Deutsche still has €25bn of those €60bn of toxic assets it earmarked for disposal two years ago. - People simply don't want to buy them, or at least not at a price Deutsche is willing to accept. The bad bank could employ caretakers for years to come.
Meanwhile:
JPMorgan is copying Goldman Sachs and setting up a new mid-market M&A team in Europe. It wants to hire 75 bankers by the end of the year. (Telegraph)
Deutsche Bank's UK redundancy package: three month's pay during the notice period, a one-off payment of less than 10% of salary, and statutory redundancy of one week of salary for every year of service until the age of 41, and one-and-a-half-week’s pay for older workers. (Financial News)
Deutsche Bank is laying off 126 people in New York. (Reuters)
Deutsche Bank paid €175m to settle a lawsuit from a Dutch housing association, which claimed its treasurer was bribed with cash and lavish perks into buying ruinous derivatives. (Financial Times)
It's a bad time to be looking for a new job in equities trading. In the first quarter, Bank of America Merrill Lynch, Citigroup, Morgan Stanley, Goldman Sachs, Barclays and UBS all reported year-on-year falls of more than 20%. (Financial News)
High-speed traders like XTX Markets, which rely almost entirely on machines, now have around 12% of the European stock-trading market, leaving big banks like Deutsche to try to grab a share of what is left. It doesn't help that asset managers and pension funds send nearly 60% of their orders to the top five dealers. (Financial Times)
Senior people keep leaving Starling Bank. (The Times)
Starling bank and its rival Monzo have offices opposite each other in London. Allegedly they have been peering through each other's windows. Starling Bank has installed frosted windows on the side of its office building, apparently to avoid this. (Telegraph)
Entrepreneurs can be vulnerable to mental health issues. Some have, a "high degree of energy, a low need for sleep, a drive that seems far beyond ordinary driven people and a vivid imagination." (WSJ)
Where is the 'iconic artwork' worth $30m that was in Deutsche Bank's New York lobby? (Bloomberg)
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