Morning Coffee: How to play mind games, by a senior banker. Nomura’s new CEO has some changes to make
When you’re sitting around in a hotel business centre, waiting to be called into a client meeting on a deal to literally save your bank, it takes a certain amount of pluck to fly out of the country, pretending to have something more important to do. But maybe that’s why Roger Jenkins, formerly of Barclays, got paid the big bucks. And although the 2008 Qatar capital issue may have ended up with Mr Jenkins and two of his colleagues on trial for alleged fraudulent side payments, the description of the deal that’s arising out of testimony is a real window into how the game is played at the very top level.
The reasoning behind Mr Jenkins’ decision to take a flight out of Doha was not just that the waiting around had got tedious (although it undoubtedly had). It was reportedly an attempt at a power move, to 'project strength' and avoid looking weak and desperate. Apparently, the Qataris were “formidable negotiators”, and Mr Jenkins expected to be “summoned to be asked certain conditions and if they saw that kind of weakness they might press their advantage”. It’s the equivalent of pretending to walk away from a car showroom, although with significantly more at stake.
In order to be able to make this move, though, it almost seems as if Mr Jenkins needed to play the same kind of mind games on himself. The telephone recordings of the conversations between him, Tom Kalaris and Richard Boath are full of sweary banter, but it’s notable throughout that, as the strain of the growing financial crisis and the painfully slow progress of dealmaking in Qatar begins to tell on the other two bankers, Jenkins remains optimistic and cheerful. His explanation for this was that “Rather than share your own anxieties with the counter-party and your client you have to have an air of confidence to get transactions completed when you are under this amount of pressure.”
Of course, the deal didn’t get done purely through the power of positive thinking. A positive attitude and £322m of consulting fees will always get you a somewhat more receptive ear than a positive attitude alone. Even there, though, the unshakeable self-confidence of Roger Jenkins seems to be a major point on which the case is likely to turn. When asked what kind of genuine value and services Barclays might be getting from the Qataris in return for the money, he replied that it would take “about a minute and a half” to detail the business he intended to win and that he thought it would be “very easy” to make deals worth tens of millions based on his new friendship with the then prime minister, Sheikh Hamad. Coming from most people, a statement like that would have quite a credibility problem, but in Mr Jenkins’ case it pretty much seems just like the way he saw the world. It’s not necessarily an example to follow – he is on trial after all – but this is the kind of attitude that gets the big deals done.
Elsewhere, Nomura has a new CEO, all of a sudden; Koji Nagai will step down in April after a troubled AGM and Kentaro Okuda will be stepping up from his current co-COO post. Mr Okuda has been responsible for the cost cutting program of the last year, more or less successfully. But now the earnings targets are his problem and “the sense of urgency is even stronger”.
Nomura’s big strategic problem is identical to that of Deutsche Bank. It has an international wholesale franchise that is marginally profitable combined with a domestic retail franchise that is structurally challenged; there’s no solid cash cow to help the investment bankers ride out the cycle and the investment bank itself hasn’t broken into the reliably profitable top tier. Cutting costs in the Japanese retail brokerage network is essential in order to get to grips with discount online competitors, but it’s not obvious that the investment banking operations will respond either to more cost cutting or to more investment. Mr Okuda has spoken about “speeding up the decision process”, but the speed isn’t necessarily the problem – it’s uncertainty about the eventual destination.
The concept of “suitcase banking” is something that happens in emerging markets; all the deals are done by people who fly in from London or New York with their clothes in a suitcase. Now Uzbekistan is cracking down on the practice, insisting on a permanent local presence or joint venture for any bank which wants a slice of the local market. Perhaps not exactly a glamour posting but potentially a profitable one. (Reuters)
Activist investor Chris Hohn has promised to start using his funds to pressure companies to improve their climate and pollution disclosures, possibly heralding a new era in which hedge funds get judgey on other people rather than being called “locusts” themselves. He’s also picked a potentially entertaining fight with Blackrock (FT)
According to Reuters, the US Department of Justice is extending its investigation into Deutsche Bank’s role in processing payments for Danske Bank’s Estonian money-laundering subsidiary. It’s going to be that much harder for Stefan Hoops to make the ambitious targets for the transaction banking division if distractions like this keep popping up. (Reuters)
Although according to Bloomberg, Deutsche’s not aware of any new investigation. (Bloomberg Law)
Jean Boustani, the shipbuilding executive at the centre of the Credit Suisse / Mozambique bribery case, has been found not guilty of fraud in New York. Not so much in the sense of not having done the acts, but in the sense that the jurors could not be convinced that anything criminal happened within the jurisdiction of the prosecutors in Brooklyn (Bloomberg)
Andrew Pearse, the banker who took the bribes, though, apparently did it all for love. (WSJ)
Dilip Khandelwal and Gil Perez, both high flyers at SAP, have joined Deutsche Bank to be responsible for its tech centres and “strategy and innovation” respectively. They will be reporting to Bernd Leukert, also a SAP veteran. Is this a clue to how Deutsche intends to clear its systems issues? (Financial News)
In a world gone smart casual, what does the fifty-something banker do with all those expensive silk neckties that he bought when they were a status symbol? Some people are having them made into cushion covers. (WSJ)
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