Morning Coffee: Senior banker's encrypted messages to boss exposed. Goldman Sachs is not a tech company after all

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This seems to be the week in which mobile messaging apps emerge as the new threat to financial services careers. Yesterday we had the trader who deleted his Whatsapp messages at the risk of two years in prison.  Today we have the case of Santander and Andrea Orcel.

As details of Andrea Orcel's failed attempt to become CEO of Santander drip out, it now transpires that he and hereditary Santander chairwoman Ana Botín were having conversations over the encrypted messaging app Signal about how reporting lines would be drawn up.  It looks rather like they had a back-channel to the main Santander management WhatsApp group, allowing Mr Orcel to advocate a “cascade” management structure, under which he himself reported directly to Ms Botín, with all the senior managers and regional CEOs in the “Promontorio” group chat reporting to him.

Fascinating as the negotiations themselves are turning out to be, the most important feature of the latest revelations might be that we have got to know them at all.  To put it bluntly, if the Signal messaging app is so secure and confidential (and it is supposed to be the most secure of the lot and is preferred by bankers for this reason), then why are these messages turning up in a court case? 

The answer is simple.  Just as, according to Benjamin Franklin “three people can keep a secret, as long as two of them are dead”, it’s turning out to be the case that “two people can have a confidential conversation, as long as neither of them has a mobile phone.”  In principle, it’s possible to set up Signal and similar apps so that all messages are automatically deleted and there’s no audit trail of evidence being continuously generated.  In actual fact, this doesn't seem to be happening, possibly due to a lack of technical competence on behalf of the bankers using it or to the taking of screenshots. Basically, if you want to be certain that your conversation is off the record, you need to physically get in the same room and have it face to face.

Ana Botín seems to have an instinctive understanding of this; as the Signal exchanges got more tense with respect to Mr Orcel’s package and staff, the Santander remuneration committee and the increasing bad publicity, she asked to call a “halt” to electronic comms and to “see each other and have a calm and frank conversation” in Madrid.  (This was the meeting, possibly more frank than calm, at which Mr Orcel was told that the job offer had been withdrawn).

On a related theme, the KPMG WhatsApp affair is still having repercussions.  A month after Tim Howarth, KPMG's most senior financial services consultant, left the firm after an “investigation” into his use of WhatsApp messages, Mike Walker and Harps Sidhu, two of the most senior remaining employees in the financial services consulting practice, have also resigned.  It is not clear why – nobody is commenting – but the FT story suggests these departures occurred “in the wake of” the WhatsApp “row” and that “the investigation […] had led to tensions between partners and unsettled some staff”.

It is confusing. It’s not clear what the messages were, or who (if anyone) complained about them.  Mr Howarth resigned when the disciplinary panel was convened, but apparently plans to appeal against it. A financial services partner at KPMG is quoted as saying “we thought it wise not to speak to each other or to Tim during that time” and now “the core leadership of one of the most profitable areas of the business has been taken out”.  It’s hard to believe that this has all been handled optimally and at this point the lack of comment – and consequent information vacuum which is bound to invite speculation – may be doing more harm than good.

Separately, there is more evidence that the Goldman world is moving on.  Lloyd Blankfein used to give annual speeches saying “Goldman Sachs is a tech company”.  Now current CFO Steven Scherr is admitting the surprising truth – they’re a bank. As he says to Handelsblatt “[W]e are a financial institution. And our goal is to make the best possible use of technology for our purposes. That makes us a better institution, but not a tech company.”  Bad luck if you thought you were joining Google.

Meanwhile …

Goldman’s coders shouldn’t look forward to seeing Marty Chavez pop in for chats about old times in his retirement – his New York house (preposterously clean white sofas and all) has been put on the market (WSJ)

And some of GS’ forex analytics will now be available directly on Bloomberg FXGO screens, saving clients from having to open a separate app (they will be able to free up a screen for sports television).  Historically, Goldman might have wanted to own the whole platform, though? (Reuters)

Juerg Zeltner has an unusual “problem of success” – he’s got so many top jobs that they’re tripping over one another.  The German financial regulator is looking into a potential conflict of interest between his role as the representative of Qatar on the Deutsche Bank board and as CEO of Qatar-owned KBL European Private Bankers. (Deutsche’s own nomination committee were cool with it, apparently). (Finews)

Olly Robbins, former chief Brexit negotiator, is joining Goldman Sachs, but in line with the new “smaller partnership” policy, as an MD earning a “six figure sum” (FT)

The conference-speech warning season is on us – Citi has said trading and advisory revenue will both be down, while Bank of America is “doing OK”.  Deutsche Bank is making a slight downward adjustment to its medium term revenue target. (Bloomberg / Bloomberg)

Photo by Victoriano Izquierdo on Unsplash

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