Morning Coffee: Banks are realizing they need far fewer human beings. Junior banker's typical weekend
Unfortunately for anyone in a non-technical job in banking, 2019 seems to be the year when banks are attaining a new appreciation that their futures are going to be a lot less human-heavy. Like peeling layers of an onion, first there was the implementation of electronic trading in FX and equities markets, then there was electronic trading in fixed income. Now we have Goldman Sachs' bond pricing engine, JPMorgan's LOXM machine learning engine, and the use of artificial intelligence to write marketing material. Couple this with an unusually slow first quarter for revenues, and it was never going to be pretty.
The Financial Times has been keeping a tally of the redundancies announced by investment banks since April. In five short months, it says 30,000 cuts have been pledged, with the bulk (18,000) coming from Deutsche Bank. Other perpetrators include HSBC, Barclays, Société Générale and Citigroup, with UBS seemingly to come.
The problem for humans with banking jobs is that banks are in a Catch-22 when it comes to staffing. The most successful banks are those which have invested in technology and therefore need fewer people. The least successful are those which haven't invested enough in technology and therefore can't afford to keep all the people they've got. Investment banks, “are facing a structural change in their revenue profile,” Ed Firth of Keefe, Bruyette & Woods, told the Financial Times. “The [banks] that will win will have the volumes, systems and computer power. How many people do you need?”
It seems that this dynamic is playing out in 2019 intern classes. There have been various complaints about a lack of full time offers, particularly for expensive summer associates, many of whom seem to be ending their internships empty-handed.
If you're looking for a career with longevity in an investment bank, you're probably better off targeting M&A or equity or debt capital markets, which seem less susceptible to the rout. However, be warned that a shrinking top-line doesn't necessarily make for a great culture. - As one junior banker who moved to a fast-growing technology company observed, in banking the focus is increasingly internal with everyone jockeying to prove their contribution to a shrivelling revenue pool.
Separately, if the junior on your desk is looking worse for wear this morning, then Khe Hy, the former Blackrock managing director who now curates the RadReads site for anyone wondering about the meaning of work, suggests why. Back in the day when he was a junior in finance, Hy says he and his colleagues had a template for weekends. - "We’d get out late on Fridays (11 pm) and drink a lot. We’d then work all day Saturday, then drink some more. Brunch on Sunday (yup, more drinking) and then football and the Sopranos. Finally at 11pm we’d stumble into our beds." Hy says this would be followed by paranoia about the Monday to come and fear about a lack of preparation for the Monday meeting.
Malaysia has filed criminal charges against 17 current and former Goldman Sachs executives, including Richard Gnodde (chief executive of London-based Goldman Sachs International) and Michael Sherwood (former chief executive of Goldman Sachs International). Goldman Sachs says the men will be, "vigorously defended." (Financial Times)
Senior bankers want Brexit over and done with. “We need to get it done; the inertia is worse than a no deal.” (Financial Times)
Citi's investment banking division is "growing carefully." - “We are adding talent and resources selectively in key priority areas. We have developed great internal talent that is here and ready to lead... We are not increasing overall head count materially and we are making sure we are managing exposure and risk prudently." (GFMag)
Bankers are cosying-up to Saudi Aramco as it releases financial data ahead of a potential partial float. (New York Times)
Uber is cutting marketing staff and freezing some tech hiring. Not all tech companies are happy places to work. (Bloomberg)
The CEO of Starling Bank started out as a technologist in the emerging markets business at Standard Chartered. . “I was spending all my time getting these systems to work and coding all night...And all the investment bankers and corporate bankers were having a great time.” (The Times)
A dress that emits a cloud of fog when its wearer is feeling stressed. (Kthartic)
Now you can practice firing a man in his late 50s on virtual reality. (Technology Review)
Imperial College student stands outside London's Moorgate station in search of a job. (CityAm)
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