Morning Coffee: Deutsche Bank traders might not be visiting New York much this year. London bankers hope for a “golden age”

Famously, the Royal Navy used to drink a toast every week to “a bloody war and a quicky promotion”. That’s a level of cynicism which even investment bankers might find a little excessive, but it remains true to say that in the right circumstances, geopolitical unrest can be very profitable for traders with quick wits and strong nerves.

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And one of those rare periods might be about to begin. All the chat at Davos at the start of the week seems to be about the growing tensions in Greenland, and the possibility (raised, although not necessarily predicted, by Deutsche Bank’s George Saravelos) that Europeans might start to weaponise their large holdings of US dollar denominated assets.

That is, it’s fair to say, significantly easier said than done. The United States of America is a country, not a company, so activist investment doesn’t work in quite the same way. And there are two sides to every trade; Europe can’t actually sell its dollars and Treasury bonds unless it can find someone to buy them. So in terms of the actual global situation, this probably isn’t a thing.

But nevertheless, macro traders will be hoping that some combination of geopolitics and risk aversion starts to drive investment decisions in Europe in 2026. Because even a small rebalancing of EU portfolios would be a very large trade indeed.  And the first thing you learn as a trading intern is that whenever there is a large, consistent and potentially relatively price-insensitive “wall of money” on either the bid or the offer, that’s when the sell side makes money. It’s the equivalent of a surfer seeing a smooth, regular left-to-right breaking wave.

The trouble is, of course, that to ride that wave, you have to pitch for the orders, which might involve writing research notes publicly recommending that clients sell the USA.  And that, in turn, might be a bit risky for some banks’ taste.

In particular, in a world in which the globalised and cosmopolitan financial services industry is increasingly coming into contact with a much more nationalistic political reality, the CEOs of the US bulge bracket banks might consider the whole thing to be more trouble than it’s worth. It’s probably no coincidence that it was Deutsche, rather than any of the big domestic players, that first came out with this piece of research.

Which then raises the question of who bears that political risk. If European banks start to get heavily involved in a politicised short-dollar trade, it’s not completely impossible that they might start seeing some sort of retaliation against their personnel, particularly from the immigration authorities.

The US Border Patrol has always regarded it as something of a gray area whether it’s OK for bankers to enter the country under the ESTA scheme for client meetings, and their willingness might be tested if foreign bankers start getting the blame for any slide in the markets. If you’re a London-based trader or analyst for a European bank, you might want to get your North American marketing trips finished earlier in the year rather than later.

Elsewhere, although 2025 was quite a bit better than 2024 for the London IPO market, it’s still hard to see how the size of the domestic equity capital markets industry could be supported if the new normal is only £2.1bn of money raised (less than Spain or Turkey, placed globally immediately between Oman and Greece). But never fear, help is on the way.

According to the Chancellor, Rachel Reeves, who will be appearing at Davos this week, we’re about to go into a “golden age” of deals in the London market, with changes to the tax and prospectus regulations ready to bring back the days when it accounted for more than 50% of the EMEA region ECM revenue pool.

UK bankers themselves seem to be more “cautiously optimistic”, and are saying that although the changes are “welcome”, there are “many other challenges to overcome”. But investment banking is, famously, a game of second derivatives, and given the many years of lead and ashes in the recent past, even a bronze or silver age would be highly welcome.

Meanwhile…

It seems that either the Goldman Sachs, Lazard, UBS and Deutsche bankers working on Zurich’s bid for Beazley are uncommonly good at keeping their mouths shut, or the London market is so dead that nobody’s around to listen to gossip. (FT Alphaville)

Keith Magliana and the former European credit team of Taconic Capital Advisors have now spun off into their own hedge fund, called “Dolomite”. It seems like a friendly spin off, as they are bringing across $1.1bn of assets from Taconic along with another $200m of startup capital. (Bloomberg)

“FOMO Sapiens”, and the great mental health hazard of banking – the temptation to think about what you might have been earning, the deals you might have won and the career you might have had, rather than paying attention to what’s actually happening. (Global Capital)

If you’re leaving New York, to escape a possible “millionaire tax”, or just to go and work in Florida, you had better be careful to move all your paperwork, cancel your country club membership and not spend more than six months in the state. The auditors are apparently “very aggressive” on unpaid state taxes. (NY Post)

“I start so early every morning that if I'm out to parties till 11 or 12 or 1, I'm just not as valuable for things that are really important, which is the chance to talk to clients”. Rich Lesser of BCG doesn’t seem to really be getting into the spirit of things at Davos. (Business Insider)

Architects of modern office buildings are keen to use the top floors and sunlit aspects for client spaces and shared amenities to make the building more attractive to hybrid working staff. But that apparently means some awkward conversations with senior executives who have worked all their lives to get a corner office. (FT)

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