Morning Coffee: Deutsche hiring expensive old timers, and a mystery solved at Barclays
For a bank that’s cutting, Deutsche Bank isn’t half doing a lot of hiring. According to Financial News*, it’s on track to make as many as 50 hires at the Managing Director level this year (so far, it’s hired 12). This might be thought a bit strange as Deutsche has a bit of a reputation for being top-heavy in its pay structure, but it’s actually quite a natural phenomenon. Paradoxically, when you fire a load of people, you often have to do a lot of hiring too.
The trouble is that cutting headcount is not an exact science. When you fire 10% of your staff, you can expect that another 10% will leave; people react to uncertainty at their current employer by looking out to the wider market, and once a resume is out on the street, it’s out there. And the 10% who leave are often exactly the ones that you’d rather keep.
So, a bank that is going through a cost-cutting process will find that it has a lot of damaged franchises (like the Deutsche Bank FIG team in London, which lost five MDs in the space of a few weeks). And if you haven’t yet decided to shut these business lines down altogether, that means that they need to be repaired; you can patch things up temporarily with juniorisation, but if you’re going to stop an impaired franchise losing money, you need to bring in a banker or trader with a personal franchise. Deutsche has always recognised this; it’s been clear from the start of the year that there would still be hiring in fixed income and in DCM origination.
But … hiring the people with the very best franchises into a situation where the entire future of the investment bank is under question, and after that bank has had several consecutive lousy bonus years is difficult. It’s notable that Deutsche has been making MD level hires of bankers who were previously out of work; it’s also been heavily targeting Nomura, the only operation in town with comparable troubles. This is probably the only way to square the circle of cost-cutting; franchise players at bulge bracket banks would tend to be very expensive to attract. And there isn’t always a cheap hire available – in many of its currently open roles, Deutsche will be needing to grit its teeth and attract someone who wants to get rich from its misfortune.
And this has knock-on effects on the morale of the existing employees. One Deutsche banker is quoted in Financial News as saying “I look at some of the people they’re lining up. It’s like hiring a 40-year-old Premier League player, or a striker who hasn’t scored a goal for years”. It’s not an isolated complaint either; other employees are saying “they rarely look internally to promote good people” and “vice-presidents and directors are getting a bit depressed, as the opportunities don’t seem to be there”.
It’s a vicious circle – the middle ranks at Deutsche don’t necessarily have the personal franchise to step up to a lead revenue-generating role, but if their teams are being led by a revolving cast of second-team players brought in from outside, how are they ever going to build one?
Elsewhere, in a franchise which not so long ago was seen as having almost as many problems, there is a new head of global markets. We wondered last week why Stephen Dainton was still being referred to as an “interim” head, even when announcing a new permanent hire into his previous job as head of equities. It turns out that he has now been confirmed in the job, with the “internal and external search” having concluded that the guy already in the job was the best one to do it.
Although Dainton takes control of a franchise that is closer to being on the front foot than Deutsche Bank, he faces some of the same problems. Barclays is planning to start hiring again, partly to mend franchises damaged by the last year’s controversy over the long term future of the investment bank. But in Asia, where Dainton plans to hire up to 60 people, memories are long and the markets business will be building up from a small base and greatly reduced goodwill. It’s a shame that investment banking is such a cyclical business, because the benefits of long term planning are so great.
Can you think of anything more annoying than building a relationship with a hot technology company, then winning the IPO mandate and doing all the work, only to see it whisked away at the last minute by a trade sale organised by Frank Quattrone? This has been happening quite frequently as Qatalyst Partners have developed a speciality in finding M&A deals for startups, leaving the bulge bracket trying to make handshake deals with the founders in the hope that they’ll still get paid (Bloomberg)
Davos goes to finishing school – the Harvard course for millennials who are going to inherit huge amounts of money. Over the course of a week, the younger members of big family offices spend part of their time learning about impact investing and “how to change the world from inside”. (Bloomberg)
Another problem for super-rich millennials – what do you do if you’ve spent all your life presuming that you are going to take over the family business, but the previous generation has reluctantly decided you’re not up to it? Bloomberg interviews the bankers who have the tricky job of combining corporate strategy with family therapy (Bloomberg)
Revolut is hiring senior management talent from the tech industry. Given its famously aggressive management culture, it’s not much surprise that 17 of its senior ranks are alumni of Uber (Financial News)
The most expensive townhouse in New York has a new owner – John Griffin of Blue Ridge Capital. Previous owners were Phil Falcone of Harbinger Partners and Bob Giuccione of Penthouse magazine, which might be enough to make a more superstitious hedge fund billionaire worry that the property might bring bad luck. (Bloomberg)
BNP Paribas’ HR team have won the Grand Prix at the Employee Benefits Awards, for their use of technology and communication to staff about their benefits (Employee Benefits)
Computer chips that improve your memory. You would need quite invasive brain surgery, and they can’t actually implant memories that weren’t already there, so it’s not exactly like a computer memory chip. But as a therapy for traumatic brain injuries, the science fiction dream is close enough (Bloomberg)
*This article originally said, incorrectly, that this information came from the Options Group.
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