Morning Coffee: Morgan Stanley’s tiny redundancies mask a worrying fact. And Citi bankers' dubious taste in breakfasts
It’s an indication of the current state of the banking industry that yesterday's revelation that Morgan Stanley will be announcing 1,500 job cuts by year-end, seems distinctly tepid. If true (no comment from the company, but apparently most of those affected have already been told), the cuts will account for around 2.5% of the global headcount. That's significantly less than banks like Deutsche or Unicredit. Most importantly, it doesn’t look like there are any “franchise cuts”, in the sense of targeted reductions aimed at business lines where MS management think there has been a permanent impairment to the revenue outlook.
The thing is that the tendency of investment banking headcount is to grow unless steps are taken to reduce it. When employee numbers are reduced to reflect the cyclical revenue generation, then as soon as there is any pickup, teams will find themselves short-staffed and will go back into the market. Even if things just flatline, numbers tend to creep back up. Morgan Stanley, for example, made pre-bonus layoffs in both of the last two years, but as of the Q3 results it had 3,000 more employees than two years ago.
Even while the quantum of Morgan Stanley's cuts is strangely reassuring, however, the structure of those cuts offers pause for thought. The axe is reportedly due to fall hardest on operations and technology, with cuts to the latter reportedly reflecting the new possibility of doing 'things' more efficiently.
This is all pretty euphemistic, but it's significant given that technology jobs have been the big growth area in banks in recent years and that Morgan Stanley isn't the only one now looking for 'efficiencies' in the area. - JPMorgan and others are doing the same. While banks are continuing to invest in things like 'robots' and the public cloud, historic technology jobs are being eradicated by things like JPMorgan's standardized and reusable APIs.
Contemporary cost-cutting is therefore not just a worry for people in cash equities and operations. The applications and projects that are being invested in right now are targeting functions further up the value chain, and that includes technology itself. Banks have always run with a surprisingly high tail-to-tooth ratio, partly because lots of the things they did were too complicated to be easily automated, and partly because there was always so much money washing around that nobody really cared. Neither is true any more. Morgan Stanley's technology redundancies, together with this week's other news that Barclays is opening a massive technology campus in Pune, India, are a reminder that technologists themselves are in banks' sights as they look to cut costs further.
Separately, reduction in headcount is often not without collateral benefits for remaining employees. Take the renovation of Citigroup’s New York offices, which has allowed 35% more square footage to be dedicated to “amenities” like a gym full of Peloton bikes (with branded black and blue clothes available to borrow, making it look like a really upmarket prison). There’s also a “Town Square” open-plan working area, where CEO Mike Corbat honestly claims he will regularly go to do paperwork and watch his employees queue up for the Starbucks. In order to fit these features in, though, some things have had to go; almost all private offices have been removed and the building has been moved to “unassigned seating”.
Citi have also refurbished “Three Eighty Ate”, the punningly-named cafeteria at 388 Greenwich Street. Apparently it served 3,000 slices of “breakfast pizza” in the last twelve months; since it has a daily footfall of 3,700 employees, this would suggest either that nearly everyone in the building has tried it once and never again, or that there are 15 guys who eat it every day. We’re not sure which possibility is more disturbing.
There are business trips which go badly, and then there’s the wild story of Vadim Benyatov, who was dragged out of the Bucharest Hilton, put in a cell with two heroin dealers and eventually convicted of espionage. He’s currently a fugitive in Los Angeles with a European arrest warrant out for him, and as a result is unable to work, “even as an Uber driver”. He’s suing Credit Suisse, who parted company with him in 2015, for not doing enough to help him; the bank is filing for early dismissal and calling the claim “meritless”. (Bloomberg)
Despite one in ten employees of Lloyd’s of London having replied to a survey saying they had witnessed sexual harassment in the last year, there have been “considerably fewer than a hundred” complaints to the new confidential hotline set up for that purpose. Chief Executive John Neal says this is “a bad thing... the survey was telling us that there are inherent problems yet those problems aren’t surfacing themselves by way of a complaint” (Financial News)
Should C-Suite executives regard their LinkedIn page as a personal profile or a corporate media presence? And if they choose the latter, what happens if they move jobs? Iqbal Khan’s LinkedIn stopped updating for several weeks after he left Credit Suisse and has only just recorded his new job at UBS. (Finews)
Is the proverbial 100-hour investment banking work week worth iAt? (AWOCS)
The “Senior Managers Certification Regime” extends its reach to fund managers, making them responsible for wrongdoings of their subordinates. Although nobody has yet really been sanctioned for that sort of thing, the chilling effect is real. (FT)
Possibly the strangest job ad of the week – an (as far as we can tell genuine) cryptocurrency company wants to hire a hedge fund professional (twenty years’ experience at a “ten figure” fund!) to work with psychic “remote viewers” to trade commodity futures. (Indeed)
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