Morning Coffee: Pedestrian British bankers given Goldman Sachs treatment. Why Jane Street beat Citadel Securities
It's debatable whether many of the 62,000 people employed at Lloyds Banking Group are "bankers" in the standard sense of the word. But whether they work in call centres, write code, or trade bonds, they're all aboard the same vessel, which is being transformed from a sturdy wooden ship into something more Sunseeker by a newish boss.
Bloomberg reports that Charlie Nunn, an ex-McKinsey Partner who became CEO of Lloyds in 2021 after a 10-year stint at HSBC, has decided to adopt the Goldman Sachs approach of clearing out bottom performing staff annually.
Nunn's approach will nonetheless be more gentle than Goldman's. At Goldman Sachs, up to 5% of people are cut every year (this year, Goldman's cuts happened in Q2). At Lloyds, Nunn is reportedly planning to put pressure on the bottom 5% of people, but only 2.5% will actually be dispensed with unless their performance improves.
The new approach comes after Nunn cancelled bonuses at Lloyds the year he arrived. It also follows a Standard-Chartered style request for Lloyds' software developers to test their coding ability, after which some will be let go.
Lloyds' new meaner approach comes as other British banks are accused of treating staff harshly, too. At HSBC, CEO Georges Elhedery is cutting costs and senior insiders complain the HSBC culture is changing. "You always knew you wouldn't get paid as well at HSBC, but that was compensated by it being a nicer place to work," says one, who says this is no longer the case.
Separately, after Jane Street, Citadel Securities and Hudson River Trading reported their second quarter results, IFR notes that Jane Street did far better than the rest.
Jane Street's second quarter revenues increased 150% year-on-year, while Citadel Securities' fell 8% and HRT's increased 100%. Over the same period, Jane Street's profits rose 50%, Citadel Securities' halved and HRT's increased only marginally.
What caused the disparity? IFR suggests it's a question of time horizons (Jane Street's are longer) and of "directional bets." Jane Street engages in proprietary trading, and it bets on market moves. Those bets paid off in Q2. Citadel Securities makes markets and benefits during period of volatility. Q2 volatility fell after the tariff chaos of April and so Citadel Securities lost out.
Meanwhile...
Bankers are becoming travel agents. Amira Bixby, 58, was once an equity sales trader. Now she arranges luxury holidays for former colleagues and clients. “They know I will protect their investment, and it’s not just money, it’s time,” she said. (Bloomberg)
Tiger Global seems to have closed its European office after frantically investing in dozens of startups. (Sifted)
Citi wealth management staff who don't want to work with Andy Sieg can move to BlackRock instead. Citigroup has asked BlackRock to manage about $80bn on behalf of its wealthiest clients and is scaling down its own asset management business in the process. Some Citi investment managers are moving to BlackRock. (FT)
Goldman Sachs has agreed to buy up to 3.5% of T. Rowe’s shares in the open market. Together they will launch target-date funds that include both public and private investments and are sold in 401(k)s and other retirement plans. Marc Nachmann, Goldman’s global head of asset and wealth management, spent the last year discussing the deal. (WSJ)
It might make sense for Goldman Sachs to acquire T Rowe outright. Goldman would get T Rowe's distribution capabilities. It would boost Goldman’s 13% return on equity: T Rowe’s is about 19 per cent, based on Citigroup estimates. (FT)
Goldman isn’t exactly buying T. Rowe for distribution, but it’s buying a little of T. Rowe and getting some distribution. (Bloomberg)
If you have more than $50m invested with Bank of America, you can now put it into private equity funds. (Bloomberg)
Ex-SocGen CEO Frederic Oudea joined Revolut as chairman of Western Europe. He says: “I had no intention of returning to work for a traditional bank." (Bloomberg)
Job hopping is out. Job hugging is in. More people are willing to remain in neutral if the pay and work-life balance are decent. (WSJ)
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