Morning Coffee: HSBC bankers have been given a nice easy schedule. UBS reveals the nightmare of AI enabled clients

Three meetings a day? Luxury!  Any sell-side analyst or capital markets roadshow banker might be permitted to raise an eyebrow at the news that HSBC employees have been reminded at a company town hall meeting that it’s policy to ensure that you have at least three meetings per day to justify the travel costs.  Back in the old days at UBS under Andrea Orcel, bankers were expected to log 300 meetings every year.  Who goes travelling for only one or two client meetings?

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Well, the answer of course is “bankers with a specific deal to sell”, and thinking about things from the point of view of revenues rather than costs quickly brings in to focus the reason why bankers hate this sort of policy.  Not all meetings are created equal; one meeting with a client CEO to discuss a specific mandate could be worth several dozen speculative pitches. 

Clients aren’t always kind enough to locate themselves conveniently for the bankers. When you’re covering New York or Zurich, there’s always someone else to meet for a quick catch-up to boost your efficiency statistics.  But there are clients in Duluth and Bologna too, and if you start to refuse to meet at their head office because you can’t work out a travel schedule to fit in another two meetings that day, you’ll gradually lose their business.

This kind of metric is known in the consultancy trade as “chicken efficiency”, after a legendary case study of a fast food chain.  The owners decided to monitor the amount of raw chicken that had to be thrown away at the end of the evening, and to base the managers’ assessment on their chicken efficiency.  Pretty soon, it became impossible to get any food in one of these restaurants after 5pm, as they would only cook things to order, so as not to waste anything.  The chain lost untold amounts of money through missed sales, but chicken efficiency was fantastic.

Of course, this is also the reason why these policies never hold for long; exceptions always have to be made.  All HSBC is really doing is sending the message “try to be sensible about the travel budget, maybe don’t take two VPs and three analysts to fill out the room”. Some bankers really do use business travel as a substitute for a social life, and it can make sense to force them to either put in enough meetings to make the trip less attractive, or to justify it on revenue grounds.

Either way, this is probably a sign of Noel Quinn’s perception of the cyclical position. HSBC is still hiring in client-facing roles, but there are apparently informal freezes in some business lines, and there were redundancies in Asia in April.  In good times, it’s more normal for Managing Directors to be complaining about targets forcing them to have too many client meetings rather than to rein them in.

Elsewhere, private bankers have, up until now, for the most part considered themselves to be relatively safe from the rise of Large Language Models.  It’s going to be a long time before they invent a robot that can ski or sail a yacht, let alone master the other skills that used to be taught at Credit Suisse under the heading of “savoir vivre”.  And consequently, the relationships of the extravagantly suntanned men and women who serve the finances of the world’s ultra-high net worth clients are not in danger.

While that’s true, it seems that the age of AI is making the job a little less fun. Apparently, the UHNWI have rather taken to ChatGPT, and according to Sabine Keller-Busser of UBS, they are using it to generate investment ideas to bring to meetings with their bankers, rather like patients who Google medical symptoms and annoy their doctors.

It sounds horrific, and will be even more so for the private bankers, who experience physical pain at the thought of telling a client “no”.  How are they going to get along trying to come up with tactful ways to tell an eccentric billionaire that “there is no such company, ChatGPT hallucinated it” or “these portfolio weightings do not add up to 100%”?

According to Keller-Busse, “It's just the beginning of what we will see”.  Perhaps there needs to be a new “dealing with AI” element on the savoir vivre course.

Meanwhile …

The problem with short selling is that the work is arduous and sometimes dangerous and the profits are surprisingly meagre.  Hindenberg Research have the psychological boost and bragging rights from bringing down a $150bn company, but in terms of actual profits you can pay bills with, they made $4m. (NY Post)

After the merger redundancies, Panmure Liberum has announced its management team and two new business units.  One of them looks quite interesting – a life sciences focused private capital team which will be based in Cambridge rather than London. (Alternative Credit Investor)

The Abu Dhabi hedge fund district is based on an island (Al Maryah), and for years the office blocks there sat mainly empty.  But things have now picked up so much that they need another island, so they’re expanding to Al Reem, which is ten times the size. (Bloomberg)

There seems to be something of a flow of talent to boutique banks at present – after Chetan Singh moving from JPM to Robey Warshaw yesterday, PJT Partners have now announced they’re hiring Eduard van Wyck, a 13 year veteran of Goldman Sachs who’s most recently been the co-head of industrials. (Financial News)

… although it’s not all one way – Goldman has rehired Michael Tarulli, the aerospace banker who left them to go to Evercore last year. (Bloomberg)

“Weak deal flow means less investment in onshore capability, which limits further deal flow”.  That’s the vicious circle which has driven the Chinese franchises of the major global banks into the ground over the last few years.  The notable exception is HSBC, which made a profit in 2023.  (FT)

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