The official line is still that until the business plan is revealed to investors with third quarter results, all reports are “entirely speculative.” But October 27 is only eight weeks away, and with the council needing to agree on what needs to be done, the time for decision-making is running out. According to “people familiar with the matter”, the hour of the confrontation is essentially this week, during the board meeting scheduled in Singapore.
And apparently it’s going to be a real debate. As you might expect given the last few months of publicity (and the fact that “shrinking investment banking” is a default for anyone who wants to sound wise and cost-conscious), there’s a strong faction at the board in favor of big layoffs and getting rid of entire divisions like the securitized products team. But there’s also apparently a strong faction, led by former JPMorgan star Blythe Masters, willing to argue that it’s a bit more complicated than that.
Banks are complicated things – they have lots of rooms and lots of connections between rooms. It’s all too easy to cut a line of business that seems unprofitable and capital-intensive, only to find that you’ve destroyed a service center for your higher-margin business and still need capital. A vision of “advisory, capital-light and wealth-focused” sounds great in a slide deck, but when you consider that the securitization team has been a reliable money generator while the net worth clients very high have included Bill Hwang and Lex Greensill, you start to wonder if there must be a flaw in the argument if these are the conclusions.
Fortunately, the ad hoc board committee reviewing the plan includes a number of people who know what they’re doing. It’s interesting to watch their journey and guess where they might line up. Mirko Bianchi, for example, was Unicredit’s chief financial officer during the Jean-Pierre Mustier years, a period of cutting costs and getting rid of underperforming franchises. Richard Meddings, on the other hand, made his reputation at Standard Chartered between 2002 and 2014; it’s had both boom and bust, and should be more aware than most that cost-cutting efforts tend to go on forever and never seem to please investors as much as you’d hope.
Blythe Masters is also on the committee and, as the inventor of the much maligned and much misunderstood debt-backed bond, she is well placed to understand how fundamentally sound companies can become scapegoats for problems. operational and compliance. And the ad hoc committee is chaired by Michael Klein, who left Citi for McKinsey in 2008.
Chicago mobster Al Capone apocryphally said that you get much further in the world with a kind word and a gun than with just a kind word. The dilemma for the CS board in Singapore this week is how confident they are that the core Swiss franchise can stand out from the rest of the business. If they’re wrong, they might find that you can win a lot more wealth management clients with a global investment banking network and a good suit, than with the suit alone.
Elsewhere, it looks like inflationary pressures affecting gasoline, potatoes and semiconductors are also starting to bite into that equally vital commodity, Bloomberg terminals. Depending on the number of terminals you have, the monthly price could increase by more than 9%. Pricing is updated every two years, so the annualized rate isn’t so much, but even so, it’s going to be a noticeable bump at a time when banks are looking at overhead costs in general.
If you are a trader, most likely there is nothing anyone can do; The customer chat and order management systems are so deeply integrated into the Bloomberg infrastructure that it’s almost impossible to remove them. If you’re in any other role, however – particularly in management – the Terminal falls somewhere between a luxury and a status symbol. As one investment bank official put it, “We’re pretty strict on access, but we’ll definitely come back if it gets too expensive.” Expect some howling, especially in smaller banks, as the reviews roll in. if you listen closely enough, you might hear a disturbance in the Force, as if a thousand green dots suddenly turned red, then silent forever.
Morgan Stanley will now also remove covid testing and notification emails. If you test positive, they say self-isolate for five days, wear a mask for another five days, but basically come back to the office. (Bloomberg)
Dystopian comic book writer Emily Laochua isn’t the only ESG professional heading to Bank of America. Their ESG team has also hired Alexandra Basirov from BNPP and Suley Saleem from Calvery Research and Management, and they are moving Andrew Stinson in-house from the global corporate banking group. (Reuters)
“You want a bank that’s going to have employees who eat nails for breakfast…you don’t want an investment bank with employees who need emotional support dogs.” More discussion of the back-to-office season, though associates arguably play a role similar to emotional support dogs for senior bankers. (CNBC)
UBS made six job cuts in Hong Kong, with bankers in DCM, investment banking and real estate all laid off from teams focused on mainland China. People seem to have been at the director and executive director level. (Bloomberg)
A detailed consumer guide to getting and using a burner phone. While it says you shouldn’t rely on unregistered status to protect you from serious crime investigation, it also provides a number of legitimate reasons why someone would need a burner phone. , which could usefully serve as a list of excuses for own a phone burner if you happen to be stuck with one. (CABLE)
An analyst fundamentally misunderstands the relationship between the quality of your Excel proficiency and your top MD status. (Wall Street Confessions)
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Morning Coffee: JPMorgan bankers are trying to stop big cuts at Credit Suisse. Terror on the floor as the Bloombergs are in danger