Morning Coffee: Why banking fees are back but banking jobs are not. How to get a $2.7bn semi-salary

Jefferies may not be the biggest investment bank, but this doesn't mean it's not important. Jefferies is often considered to be a bellwether, simply because it reports quarterly results earlier than other banks and therefore gives a heads-up on how conditions are likely to have been for bigger rivals.  On the basis of the Jefferies numbers announced yesterday, the band should be playing “Good Times” and bankers should be expecting another hiring boom and tight labour market.  Or should they?

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There’s certainly nothing to sniff at in Jefferies' results. M&A advisory revenues were up 77% on last year to create Jefferies' best ever quarter.  CEO Rich Handler is talking about a strong pipeline of further deals with “momentum across all of our business lines”.  What’s not to like?

The problem is that the recent growth in Jefferies' banking revenues won't drive hiring. Instead, Jefferies is growing into the hiring that it’s already done.  Last year alone, the bank added over 100 managing directors as part of Handler's drive for growth. Those rainmakers are making it rain, but Jefferies' president Brian Friedman said yesterday that Jefferies won't be continuing with its hiring push "at the same rate" as during, "recent periods of dislocation, when competitors were pulling back and cutting staff."

Jefferies isn't alone in this. While 2023 may have been a weak year for banking revenues, it wasn't a bad year for recruitment. In 2023, as banks like Goldman cut thousands of people and Credit Suisse collapsed, others took the chance to add talent at much cheaper prices than usual. This didn't just apply to Jefferies: Deutsche Bank and Santander were at it too. In 2024 that dynamic no longer exists.

It doesn't help that the financial sponsors bankers who help private equity firms buy and sell portfolio companies are still underemployed. Sponsors activity now accounts for over a third of the M&A market and as Goldman Sachs' CEO David Solomon has pointed out, sponsors activity will need to bounce back if M&A fees are to truly recover. 

This doesn't mean Jefferies has stopped hiring altogether. The bank hired 300 people in the third quarter. However, Friedman said the new focus is investing in research capabilities instead.  

Elsewhere, the banking industry is well-known for stories of employers who let talented employees go, and then ended up having to hire them again for much more money.  Few banks have done so quite as spectacularly as Google, though. The technology firm has just paid $2.7bn to acquire a start-up called Character. It's a move widely being seen as a way to “acqui-hire” its founder, Noam Shazeer.

Shazeer has worked for Google before and is a star. He co-authored the “Attention Is All You Need” working paper that formed the basis for the “transformer neural network” architecture that sparked the current AI boom.  He also created a chatbot called Meena, which could have been available a year earlier than ChatGPT.

When Google refused to release Meena, Shazeer and one of his colleagues quit in frustration to start Character.  Now he’s back, having pocketed hundreds of millions of dollars.  Google may have learned a lesson about keeping your best people happy, but the tuition fees were certainly high.

Meanwhile …

Echoing the theme of the rise of lower tier players, the bidders for Indian boutique Avendus include Carlyle Group, but it looks like Nomura and Mizuho are determined to get a foothold in Asia’s current hot market. (Bloomberg)

This week’s least surprising news is that a survey of Goldman Sachs interns reveals that 93% of them think that they are too special and clever to be replaced by chatbots, and instead that AI will help them.  It would actually be interesting to keep track of the other 7%; these are about 150 young bankers who were not afraid to consider a very unpleasant possibility and to speak their mind in the face of a quite leading question.  They might have a very good future in risk management. (Quartz)

The third series of “Industry” is finally available in the UK. (FT)

Wellington Asset Management has offered voluntary redundancy to “a small number” of “long-tenured employees”.  It’s not clear what proportion of them took it, but the total number of layoffs is about 3% of the workforce – less than last year’s cuts. (Bloomberg)

Sometimes you can’t win for losing; Alan Ecock was sacked from his job at a bank when his boss read about him having won an unfair dismissal case for being sacked from his moonlighting job in a pub.  (RTE)

Rennaissance Technologies is a rare and impressive name to have on a resume – Michael Gugliemo has gone to Jain Global to help them start a systematic trading pod. (Financial News)

Andrea Orcel continues to give his masterclass in how to land a hostile FIG deal.  Today, he’s playing a little bit of nice-cop, saying that he doesn’t necessarily want a board seat at Commerzbank, but might want to “influence its strategy” from outside.  Deutsche Bank have ruled out getting involved, large investors have suggested that Commerz take the offer seriously, and the German government seems to be looking in vain for its next move. (Bloomberg)

Should we all be dressing like 1970s bankers?  This question is being asked of fashionistas, not current bankers. (Elle)

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