Morning Coffee: “I would go back tomorrow. They were my finest years in the industry!” Some terrible timing for Tidjane Thiam

Emotions were running high at Balls Brothers in Austin Friars yesterday, a bar just around the corner from Deutsche Bank's office on London Wall. "There were plenty of tears, of course," a banker holding a glass of rosé told the Financial Times. “I would go back tomorrow if they wanted me,” he added, saying that the 11 years he spent at Deutsche Bank were his finest in the industry. 

It's a point that shouldn’t be forgotten. Deutsche didn't used to be the industry laughing stock it's become in the last couple of years.  At its peak in 2007, it had a market capitalisation of $60bn, more than Morgan Stanley and only a little less than JPMorgan.  In 2003, it was considering something close to a merger of equals with Citigroup.  The phrase “Goldman Sachs of Europe” has been something of a millstone round Christian Sewing’s neck, but back in the Anshu Jain years it really did look like an attainable goal.

Even the equities franchise, which is bearing the brunt of the cuts, shouldn’t be underestimated.  The man drinking rosé is quoted as being an “equities banker”, and so may have been part of the top ranked equity sales team in Europe, according to the most recent Institutional Investor survey.  Deutsche is also top five for equity research in Europe and number one in Asia according to Starmine.  They recently regained their position in FX trading, and the prime brokerage business going to BNP Paribas was rated number 2 in the world as recently as 2017.  The current disappointing targets for return on equity have to be compared to the 25% target that was current as recently as 2012.

The issue here is that, whatever anyone says, Deutsche isn’t in the trouble it is today because it did banking badly.  In fact, it did banking very well up until the global financial crisis, and even in the crisis, its losses were smaller than most.  Unlike nearly all of its competitors, it should be remembered, Deutsche Bank did not take a taxpayer bailout.  The trouble is, it should have done; the post-crisis financial order was one in which regulators were no longer prepared to tolerate the high leverage that Deutsche’s business model was based on.  Successive CEOs chose to deal with this fact by ignoring it, eroding first the share price and then the franchise.  By the time Christian Sewing came along, cost cutting was the only thing left to do.

And there were costs to cut, because Deutsche used to pay very well.  In the glory years before the crisis, they hired the Rolling Stones and split a €4.4bn bonus pool.  In 2009, when the crisis had driven the competition out of the market leaving Deutsche to enjoy its best revenue year ever, mediocre rates traders got $9m.  The Asian credit franchise made current U.K. Home Secretary Sajid Javid a rich man.  Even as belts were tightened, Deutsche continued to pay big salaries and support a top heavy management structure with lots of MDs.

So, let’s remember the good days.  It’s a sad time for a lot of our fellow industry professionals, but few of them have anything to feel ashamed of.  DB was brought low by a series of bad decisions at the top, but in its day, Deutsche Bank’s investment banking franchise can also say “Once, we were kings”.

Elsewhere, the timing of Christine Lagarde’s departure to the ECB appears to be inconvenient for Tidjane Thiam.  Although he’s denied it in the past, talk persists that TT’s long term ambition is to be Managing Director of the IMF; he’s been offered jobs at the World Bank IFC already, not to mention his political career in Côte d’Ivoire.  Now, with Ms Lagarde leaving the IMF early, the vacancy has arisen earlier than planned, and if Thiam were to wait for another MD to serve a term at the IMF, he would be 61 when he starts there.

On the other hand, applying for the post now would mean leaving Credit Suisse after three years’ worth of painful restructuring and without any chance to bask in the glory of success – it would also mean a difficult succession for CS after Iqbal Khan’s departure.  Some commentators are constructing what appear to us to be somewhat far-fetched speculations that this might mean TT’s exit path from his current job might involve negotiating a merger, possibly with Morgan Stanley.  Stranger things have happened in banking, although we can’t immediately name any.

Meanwhile …

Speaking of Iqbal Khan, he did not show up as CEO of Julius Baer after all.  Philipp Rickenbacher, the head of advisory solutions, was promoted internally; he’s well-regarded if not particularly high profile and will have to gain the approval of the front-line private bankers.  Meanwhile the next guess for Iqbal Khan is UBS, where he might fill a succession planning gap. (Finews)

Bank of America seems to have been first and most aggressive in staffing up its post-Brexit Paris office, and as a result has gained an advantage over rivals as the local hiring market heats up. (Bloomberg)

According to the developer involved, Deutsche Bank will still be committed to its planned new office at Columbus Circle; the US employees still left will have plenty of space (Bloomberg)

“Take a pay cut”, “Move out of New York City” and “Consider the buy side”.  Advice for Deutsche Bank equities personnel from the founder of Plinth Capital LLP (LinkedIn)

Alternatively, it’s now possible to make a career as a professional Dungeons & Dragons player.  This might be a potential next step for someone with a background in sell side equities; constructing elaborate fantasy stories and then finding out that everything’s determined by a roll of the dice somehow feels like it has synergy. (Bloomberg)

A former UBS FICC banker and head of global repo at Standard Chartered is launching a new “safe and respectful” social media app aimed at the Muslim community (Ilford Recorder)

Neil Boston, the head of investment banking technology, has left UBS, seemingly leaving the project to clear up the tangled mess of incompatible product systems unfinished (Finews)

Ray Dalio recommends a history of the rise and fall of the great empires since 1500 as the best way to get insight into the current state of the USA and China. (Business Insider)

There’s an asteroid out there made of solid gold, and NASA is sending a mission to mine it.  Spoilsport economists point out that this won’t actually make anyone rich (Bloomberg)

The most disgusting workplace problem of 2019 so far (Ask A Manager)

Photo: Tristan Bejawn, copyright eFinancialCareers

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