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Morning Coffee – Deutsche Bank’s “Nifty Fifty” taking on Wall Street. Goldman VP uses massive amounts of accrued holiday to become a video star

As always, if you want to know what senior bankers are thinking, pay attention to what they do, rather than they say.  Anyone can make bland assertions of generalised optimism, and even specific statements like “a significant rebound in 2024” are relatively cheap to make.  But hiring people is expensive and can’t be easily or cheaply reversed; it’s something you only do if you’re genuinely confident.  So the fact that Deutsche Bank has grown its front-office staff by 4% and recruited 50 senior dealmakers adds quite a lot of gravitas to COE James von Moltke’s comments on the revenue outlook.

It's also interesting that fifty experienced bankers decided that Deutsche was a better bet than wherever they were working beforehand.  It’s becoming quite noticeable that the bulge bracket banks have been slowing down or reversing net hiring, while firms who hadn’t necessarily been thought of as playing in the same league are coming quite aggressively to the labour market.  Deutsche has hired its “nifty fifty”, but Santander wants to pick up a nifty 150 bankers (including as many as 60 Managing Directors), mainly in the USA.  Unicredit is “ramping up”.  And so on.

This is great for bankers – particularly Credit Suisse bankers, who are being released into a hiring market much more welcoming than they might possibly have expected, but what does it mean for the industry?  The big incumbents of Wall Street have a huge amount of market share to defend, and even quite significant gains for second-tier players would really only begin to reverse the trend of the last ten years.  But it’s no longer looking so obvious that there’s only room for one domestic player in Europe, or that overseas firms can’t hold onto a viable niche in North America.

In fact, if you look at competitive conditions, a lot has changed since the pre-pandemic era.  European banks aren’t necessarily held back so much by legacy legal issues.  Shareholders don’t seem to be so fixated on “stable earnings”.  And the “fortress balance sheets” which served the US banks so well might be eroded substantially by regulatory changes.  Added to which, the bulge bracket players gained market share during the boom and staffed up accordingly, leaving them with more excess capacity as the environment normalises. 

It has never been a good wager, historically, to bet that any non-American bank will successfully challenge the Wall Street incumbents.  Their home ground advantage in the world’s biggest and deepest capital markets is just too big.  But on the other hand, the bulge bracket have had it all their own way for more than a decade.  It’s not unreasonable to believe that the plucky little Europeans might be about to claw back a little bit of relative status.

Elsewhere, one of the little lies that bankers tell themselves and their families in order to feel better about missing another holiday is that they’re not really losing the paid time off, they’re just rolling it over, and that some day they’ll be able to use all their accumulated leave on the trip of a lifetime.  As anyone who’s been married to an MD might be aware, more often than not this great future vacation is something for dreaming about, not something for doing.  Maybe it’s more realistic to do what Galey Alix Gravenstein, a VP at Goldman Sachs has done.

Having accumulated 82 days of paid time off by “a decade of not taking vacations” at Goldman, she decided not to go on a three month world cruise, but to spend three days at a time making over other people’s houses in a 72-hour interior decoration glow-up for her Instagram channel.  This side-hustle has turned into a TV show on the HGTV channel, but Alix still hasn’t left Goldman – she doesn’t feel like she can afford to walk away from the stock options unless it’s renewed for a second season.

Meanwhile …

Most bankers have by now made the joke about Excel spreadsheets which have grown so complicated that they’re about to achieve sentience, but according to Republican legislators, this might be the law.  The new SEC rules on governance of artificial intelligence systems could apparently cover “a myriad of commonly used tools could qualify such as a simple electronic calculator”.  (Bloomberg)

Barclays is pushing back the date on which the analyst class finds out about their bonuses for the year.  Cynics might attribute it to the well known phenomenon that “bad numbers take longer to add up”, but Barclays also appears to want to move more in line with the Wall Street calendar, possibly reflecting a feeling that this is who it’s competing with. (Financial News)

You can take the analyst out of the activist hedge fund, but you can’t take shareholder activism out of the analyst.  Rishi Sunak has demonstrated that his days of demanding management change are far from having been left behind at TCI and Thelema Partners, as it appears that it was his intervention (partly in his capacity as representative of the UK government’s 39% shareholding) which finally tipped the balance for NatWest CEO Alison Rose to resign. (Bloomberg)

The flow of unpleasant documents coming out of the JPM/Staley/Virgin Islands litigation continues, with internal memos from JPM referring to “that scum Epstein” … (Business Insider)

… and other documents recording how wealth management executives were trying to tap into his contacts in the Florida retirees market to see how badly they were taking the news about Bernie Madoff. (NYPost)

The delivery company Just Eat is caught in a bind as it tries to dispose of US subsidiary Grubhub; the deals market is still weak, but its own investors have aggressive targets for the valuation.  In a lament that bankers will recognise, CEO Jitse Groen said “t’s all very easy on Excel sheets, it’s very hard in reality”. (Bloomberg)

Why do people want to have their bank account at Coutts in the first place? (Guardian)

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AUTHORDaniel Davies Insider Comment

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