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Morning Coffee: Barclays’ nice guy with the 6:30am starts needs to get tough. Why $175k is the worst amount to earn

Coimbatore Sundararajan Venkatakrishnan – the Barclays CEO universally known as “Venkat” – is almost universally liked.  He is a fan of cricket, and he shows an example by getting to the office by half past six every morning.  He took over the top job from Jes Staley in about the most difficult circumstances imaginable, and he’s come through two years of cancer treatment.  Despite a pretty lacklustre share price performance for Barclays during his tenure so far, he goes into the forthcoming major strategy presentation scheduled for the 20th of February with investors, for the most part, rooting for him. 

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The investment banking and markets division of Barclays, however, is nothing like as popular.  Its employees and executives don’t have a reputation for personal charm – as KBW analyst Ed Firth puts it, “We all know people at Barclays’s investment bank. There are a lot of big heads and wide shoulders there”.   

And wholesale divisions of universal banks often have an image problem with investors.  There’s a tendency among Warren Buffett fans to identify “folksy” with stable earnings and “flashy” with low-quality businesses.  Consequently, nobody starts talking about what a risky business retail lending is, even when it regularly generates a scandal with the potential to give back a decade’s profit.  But a couple of lean years in bond trading will always bring out commentators telling CEOs like Venkat that they need start looking for cost cuts in the investment bank. 

The trouble is, as Deutsche Bank spent a decade painfully learning there’s really no such thing as an incremental efficiency gain in this industry.  You either do things right – which is expensive – or you’re much better off not trying at all.   

Paul Compton, the current head of investment banking and former COO, has plans to do as much as can be done to automate the back office, take fat out of the middle office and generally reduce the ratio of overhead costs to revenue-generating expenditure.  But he’s also presided over a couple of bonus rounds which seem to have caused quite a bit of bad feeling according to WSJ reporting.  The combination of fixed compensation budgets, some aggressive hires with guarantees, and informal “guidance” given on the basis of revenue assumptions which didn’t turn out may have damaged Barclays’ employer brand. 

And so, going into the big strategy presentation, Venkat needs to remember the example of Christian Sewing.  Making marginal cuts and trying to ration capital to an investment banking business just ends up creating a self-reinforcing cycle of unprofitability, as good bankers leave and their replacements demand a “danger money” premium.  What you need to do is make a firm and authoritative decision – is this business line worth being in? If it is, then you need to accept that it is a cyclical business, and that success depends on the capacity to bear pain.  If not, then you need to get out completely, no matter how painful that seems.  It’s not exactly a counsel of “no more Mr Nice Guy”, but sometimes the only way to stay popular in the long term is to be ready to give bad news in the short run. 

Elsewhere, consider the pain of the senior associate or junior vice-president.  These middle ranks are notoriously some of the grumpiest people in investment banking, with a tendency to take out their frustrations on analysts.  This is partly because they are passing things downward from the ranks above them, but also because they earn what Finance Twitter (X?) considers to be the most frustrating salary range there is - $175k to $200k. 

People earning this much are very well paid by almost any standards other than banking – so they’re stuck in the industry.  But they’re unlikely to be saving enough to build long term wealth, and the bills associated with a banker lifestyle add up – there’ s not necessarily all that much genuinely discretionary income left to spend on treats.   

No wonder that this is the point on the income curve associated with the very lowest fertility rate.  Although there’s an obvious sense in which it’s tasteless to say that people earning multiples of the median income have it tough, it’s also worth pointing out that this isn’t a bracket where bankers are expected to stay for long – if you reach this rank well done, but if you’re still there after five or six years, the likelihood is that the banking industry is telling you that you should think about doing something else. 

Meanwhile … 

Standard Chartered is also considering its strategy, with some possibility that CEO Bill Winters will decide to separate the investment bank from the corporate banking operations.  This apparently might result in job losses, implying that at least one of the two separate businesses would be smaller.  Alternatively, it might just be a recognition that this division (currently run by Simon Cooper) is just too big as a proportion of the group to not need separate recognition for its component parts. (Bloomberg) 

In the past, the paying of massive whistleblower awards has been seen in London as “just not British”.  Nick Ephgrave, the new head of the Serious Fraud Office wants to change that, potentially creating a new way for bankers to get rich. (FT) 

No hard feelings on either side apparently, as Anthony “AJ” Vaccarino returns to work with Steve Cohen.  Having been subpoenaed (but never charged) in the “Black Edge” insider dealing scandal at SAC, he spent a while running his own hedge fund and has now joined Point72 (Business Insider) 

Greg Coffey hasn’t been in the headlines so much since closing his hedge fund.  Apparently, though, he owns a flat in London with dodgy plumbing which frequently ruins the carpets and handbags of the former first lady of Iceland in the flat below. (Daily Mail) 

New hirings in ESG roles were outnumbered by departures in December last year, with BigTech companies cutting back the most. (WSJ) 

“Limerence” is apparently a new TikTok buzzword, meaning roughly “the negative productivity consequences of having a crush on someone you work with”. (Bloomberg) 

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AUTHORSarah Butcher Global Editor

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