Morning Coffee: Only 84 days until Goldman Sachs reveals its five year plan. And France wants roofers, not bankers
David Solomon is trying to damp down excitement, saying that the Goldman Sachs investor day planned for January 29th next year “Won’t be a big reveal”, but a certain amount of anticipation is only natural – in twenty years as a public company, this is the first time that Goldman has invited investors in for the kind of all-day strategy presentation that’s a common event at ordinary banks. It's also the first time that Goldman has committed to a "multi-year" plan that lasts a Stalinist five years.
When Mr Solomon says that there won’t be a big reveal, he doesn’t mean that this isn’t an important event, or that it won’t mark the start of a new era at GS; he just means that none of the announcements should come wholly as a surprise to people who have been paying attention. After all, many of the new initiatives are already under way, so there is plenty of public information about what GS is likely to say in just under three months’ time.
In summary, the biggest message is that the nature of Goldmans’ trading businesses is “evolving” and that the future is all about "platforms." Even if you didn’t listen to David Solomons saying this in a series of interviews since becoming CEO, you could guess it from the shape of the top-level turnover (“personnel is policy”, as they say). Although there’s disagreement over whether there have been an unusually high number of partner resignations over the last twelve months, it’s been really noticeable that there have been a lot of “old school” traders leaving the firm for senior positions elsewhere. If you’re in sales & trading, and you’re neither a coder yourself nor someone working closely with computer programmers, you’re probably not part of the key strategic direction of the firm.
It’s a bit of an industry proverb that big banks always hate to admit what they are, and as a result they tend to fall into one of two delusions – either they think they’re a retailer, or they think they’re a utility. It is further alleged that incoming CEOs generally choose which of the two they’re going to pretend to be during the interview process, and the choice is usually made as an explicit break with the career path that led them in to the C-Suite. Looked at in this way, it’s not wholly surprising that after a lifetime of customer service and bespoke transactions, David Solomon has developed a vision of big fixed assets, incredibly low marginal costs and “stable recurring revenues” through platforms and integrated systems like Marquee. Even the literal retail bank offering, Marcus, has steered away from high-end and complicated products toward basic deposits and loans that can be driven across a banking platform at minimal cost.
It’s unlikely that anyone at the GS investor day will feel bold enough to utter the c-word – “commodity” – because this is still Goldman Sachs and it still wants to maximise the intellectual capital and value added in every transaction if it can. But it’s a new environment for bankers, not least in compliance terms, and if things get a little bit more organised, standardised and automated, then there will be less dependence on the kind of lucrative but messy big deals that have caused so much trouble in the recent past.
Meanwhile in France, bankers might be well advised to keep an eye on the new quota system for professional immigration, as more US firms open up their European headquarters there post Brexit. There is no plan to change the aggregate number of around 33,000 professional migrants a year, not at present at least. But with domestic unemployment still high, the quota system is going to be focused on skills which the French economy needs. The examples given by the Interior Minister were of “roofers” and “geometricians”, where France apparently has a shortage of trained staff. But can mid-level bankers be sure that Paris will recognise their uniqueness and value? At present, after all, although the Brexit offices are still in set up phase, they don’t appear to be hiring very aggressively except on the graduate programs. And if there’s one thing that the French economy is famously not short of, that’s unemployed young university graduates. Perhaps anyone who thinks they might need to spend some time in Paris post Brexit ought to be taking a short course on how to construct hexagonal ceilings.
Meanwhile …
RBC is cutting 40 trading and investment banking jobs in London. (Bloomberg)
Is it the eventual Bloomberg-killer, or is it another aggressive debt-funded roll up? Whichever is the case, Ion is growing quickly, but also seemingly clearing out a lot of staff from the companies it takes over. (FT, Waters Tech)
When a fund manager with an enviable track record of 20% returns has a terrible year, then tells investors about “the fierceness of our conviction” in the loss-making portfolio, it’s a difficult call to make. Is this over-confidence, or should you trust the process? (AFR)
When Ray Dalio says “I think we’re going to try to kill each other”, it’s always a relief to check that he’s talking about general economic inequality rather than a new HR strategy at Bridgewater. In conversation with Paul Tudor Jones, he discusses what he considers to be a national emergency in the USA. (Institutional Investor)
Ana Botín, on the other hand, says that distrust of bankers and other elites is fuelling global populism and that companies must look beyond shareholders for the good of society. No specific reference to the Andrea Orcel case was made. (Bloomberg)
Something of a curiosity – JP Morgan is forming a venture capital coverage team and hiring three executives from Silicon Valley Bank to staff it up. But it’s going to be located in the corporate banking division rather than the investment bank and work with middle-market bankers. (Business Insider)
“Hot coral” is apparently fintech startup Monzo’s name for the shade of orangey pink on its credit cards. If you like the colour, you can still use it apparently; it’s recently withdrawn a trademark application. (Financial News)
Iceland now uses more of its (plentiful, cheap geothermal) electricity generation capacity for mining Bitcoin than it does for homes. (Wired)
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