Morning Coffee: Bank recommits to preserving jobs amidst dark vision of future. Early morning Goldman Sachs calls
Like a bubble of methane erupting from melting permafrost, the suggestion that European banks should engage in some aggressive restructuring has a tendency to keep surfacing.
The latest person to broach the topic is Jerry Del Missier, the ex-COO of Barclays. Writing in the Financial Times, Del Missier says mergers between underperforming European banks are a bad idea: European banking is full of "too many undercapitalised, unprofitable and uncompetitive institutions" for them to work, he says. Instead, Del Missier is an advocate of cutting entire business areas in a way that should probably have happened after the last financial crisis.
If you're looking for an example of what this might look like, you can find an appropriate vision of doom in a recent article (in German) published by Handelsblatt, Germany's business newspaper. Handelsblatt details the evolution of IKB, a bank serving the German Mittelstand (SMEs) that made big losses during the financial crisis and has since engaged in the sort of restructuring that makes Deutsche Bank's decision to cut its equities sales and trading business look like a flesh wound.
IKB has cut costs by 50%, says Handelsblatt. It now operates from a "faceless office building" on an industrial estate instead from a chi-chi office in Frankfurt's financial district. In the past decade, IKB has jettisoned all businesses that were non-core, including derivatives structuring and trading, M&A advice and (mostly) loans to private equity firms. Entire IT systems have been dismantled. Its CEO Michael Wiedmann says cross-selling doesn't work ("You dream of a situation that will never occur"). But thanks to the scale of its restructuring, IKB is profitable again. And not just a bit profitable either: the cost income ratio this year is just 56%. It's all about doing what you're good at, says Wiedmann: "You have to concentrate on what you can do better than the competition."
Other struggling banks might get ideas. For the moment, though, at least one European bank is reaffirming its intention of delaying major restructuring until the pandemic is over: UBS chairman Axel Weber said this weekend that Swiss bank decided not to undertake any "new restructuring programs" at the start of the pandemic and that this still holds. Weber didn't rule out cuts in the future, though: "Of course, we will keep checking the situation," he added.
Separately, if you want to receive a Goldman Sachs partner call, you'd better be out of bed early. Ryan Nolan, the San Francisco-based co-head of global software investment banking, took his call at 6.51am last Thursday. He told Business Insider that he'd just finished giving his daughter her morning bottle when the phone rang, and he got the news.
Should Jamie Dimon be Joe Biden's Treasury secretary? He's said he wants to stay at JPMorgan until 2023, and he turned down Trump, but hey. (NYPost)
Jane Dunlevie, the co-head of Goldman's global internet investment-banking business, who was promoted to partner last week, is the daughter of Bruce Dunlevie, co-founder of Silicon Valley venture capital firm Benchmark Capital, which made early bets in eBay and Uber. (Business Insider)
Goldman seems to be skewing towards the Americas. Of the 60 partners announced last week, 71% were based in the Americas, up from 58% the last time it made the promotions in 2018. (Financial News)
Ex-Credit Suisse CEO Tidjane Thiam has been recruited by the Rwandan government to make Rwanda a business destination. (Swissinfo)
Biden is appointing some heavyweight proponents of stronger financial regulation to his transition teams and it hasn't gone unnoticed on Wall Street. (New York Times)
Goldman Sachs CEO David Solomon reminisced about his earliest jobs. "As a kid when it snowed, I grew up outside of New York, with a friend we used to go and knock on doors to shovel driveways. It wasn't that complicated you knocked on a few doors, you made some money. It's a good base lesson." (Financial News)
HSBC probably needs to appoint some Chinese senior executives. British nationals represented 16% of HSBC’s workforce but 36% of senior leaders in 2019, while Chinese nationals made up 23% of employees and just 9% of senior leaders. (WSJ)
Google's building a Seattle campus. (Bloomberg)
An air corridor could open between London and New York. (Bloomberg)
The husband and wife team who developed the COVID vaccine are teetotal and celebrated by brewing some black tea. (Financial Times)
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