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Morning Coffee: Barclays appears to be paying well in its banker hiring spree. Why bankers shouldn’t always feel guilty about oligarchs

Although there may be clouds gathering on the horizon for capital markets and advisory franchises, there’s at least one bank that is still not only talking optimistically, but putting its money where its mouth is.  A couple of weeks ago, Jean Francois Astier of Barclays was expressing the view that M&A activity “is going to remain very high and very intense … all around the world”, and targeting the number four position in North American advisory.  Part of that project involved a “hiring spree” in which Gary Posternack and Ihsan Essaid were instructed to hire bankers “at all levels”. 

Now we’re seeing one of the early results of that spree; the industrials investment banking group has hired Jack Sise, formerly a managing director at Centerview.  And Sise won’t have been cheap.

Even by the standards of large boutique investment banks, Centerview have a reputation for being good payers.  This is true up and down the structure – they were top of the Litquidity survey for junior banker pay last year.  But it’s at the MD level where the difference really stands out.  According to Mark Moran of Litquidity, Centerview has an “eat what you kill” payout structure for MD employees, where they can earn a proportion of the fees on deals that they originate. 

This isn’t quite as ludicrously lucrative as being a partner (and taking a bit of a lot of other people’s deals too), but even a small percentage of a small percentage of a couple of billion dollar deals can add up pretty quickly.  And the prospect of making partner ought to mean that MDs would be even less willing to leave.

According to the published accounts of Centerview’s UK partnership, in the year to March 2021, just one part of the group made £45.8m in fees and paid £12.3m in wages and salaries, plus £28.2m in cash distributions to the eleven members of the partnership.  One of those “members” is the Centerview UK holding company, and there might be other payments back and forth with the US headquarters, but it gives an idea of how much money is available. 

So, if Barclays has managed to take an MD out of a compensation structure like this, it means one of two things.  Either, Barclays has so much spare money of its own that it’s prepared to beat bid-back offers from Centerview and extract a senior employee.  Or, an experienced banker near the top of the tree has looked at the immediate outlook for the industry and decided that a bit of security in a too-big-to-fail national champion is worth more than a percentage share of the next few years’ worth of deal revenue.

One of these interpretations – which are not mutually exclusive – is obviously a lot more optimistic than the other.  So perhaps, in terms of gauging the true medium term outlook for salaries and bonuses, we should be looking not so much for more big-ticket hires at Barclays, but to see if there are any more departures from Centerview.

Elsewhere, many bankers have been understandably reluctant to say anything public about the ethical issues raised by their operations in Russia or with oligarchs.  Everyone has been quick to obey sanctions, drop clients and freeze assets, but few in the industry want to talk about why it was that they were doing the business in the first place.  It seems that at least one senior lawyer is not quite so shy. 

Former Herbert Smith Freehills managing partner James Palmer has come out in defense of the City, pointing out that “Law firms or accountancy firms or banks don’t have the time to be the Foreign Office as well as running our firms … Engagement with Russia has been the policy of multiple governments and has been actively encouraged” and that “Reacting to Russia’s invasion of Ukraine is absolutely right, but it’s different from saying ‘oh God we got this all wrong before,’”.

It's an interesting case; like all good lawyers’ arguments, it is very hard to refute, even if it does give you a slight sense that something about it is a bit too convenient to be true.  If nothing else, it might help some wealth managers and lenders sleep a little easier at night.

Meanwhile …

Goldman Sachs bankers are allegedly threatening to quit rather than return to the office five days a week. (New York Post)

Apparently, if a private equity seller doesn’t get the absolute top tick in terms of pricing, that’s got to be someone else’s fault.  An investigation into the nascent “block trading scandal” finds evidence that shopping a big block of stock around the market sometimes makes the price go down. (WSJ)

BlackRock’s Rob Kapito has decided to make the rest of the week interesting for himself with a bit of umprompted generational warfare, claiming that the generation whose peak years were blighted by the financial crisis, the pandemic and now a war are a bit too “entitled” compared to the generation of the Great Moderation and the internet boom and need to learn about shortages. (Bloomberg)

Business Insider is launching a kind of “People’s Choice Awards” to the Institutional Investor “Wall Street Oscars”, asking for nominations of the rising stars of sell side research.  (Business Insider)

Morgan Stanley’s “Advancing Futures” program has recruited 300 of its mid-career bankers to act as mentors to students from “less well-off” backgrounds and get more socioeconomic diversity into investment banking.  The traditional Friday afternoon trading desk conversation of “who is most/least posh?” might be about to get a bit more interesting. (Financial News)

What do you learn at business school? Research from America suggests that managers with MBAs are no more productive than ones without, no better at growing sales or identifying opportunities but are much more likely to cut the pay of their employees. (Bloomberg)

Congratulations to former JPM Fixed Income Syndicate banker Joanna Dai!  The quest is now on to find the last remaining female investment banker who neither launched a skincare brand nor designed a collection of professional yet comfortable everyday performance wear. (Drapers)

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AUTHORDaniel Davies Insider Comment

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