Morning Coffee: Head of investment banking recalibrates meaning of “massive bonus”. Top Goldman trader gives it up to do boring banking

If there’s two more beautiful words in the banking lexicon than “hiring spree”, then they might be “massive bonuses”.  SocGen staff (if they were watching Bloomberg television) must have sent up a raucous cheer at hearing Slawomir Krupa, the head of their Global Banking and Investor Solutions division, say that “I won’t give you the figure, but it will rise massively”, referring to the bonus pool.

Shortly afterward, expectations were brought back down to earth when he clarified that “massively”, of course, meant “in line with most of our peers who have similar business models”.  It’s understandable – there was probably a lot of adrenalin in the room for SocGen top management after a quarter in which they beat market expectations and confirmed the best set of annual results in the company’s history.

But it feels like a Freudian slip rather than a simple piece of out-of-control bluster.  Because … is there a better summary of the way that the investment banking labour market feels right now than someone saying “massive” when they mean “average”? (In truth, even average might be a good thing at SocGen, given that last year's bonuses for top traders there were €596k when most U.S. banks pay seven figures and BNP paid €859k).

It’s not just SocGen by any means.  Everywhere around the industry there are hiring sprees and massive payouts.  Sometimes it’s both – Ken Moelis has raised pay by a massive 63%, created 19 new managing directors at a firm with less than a thousand employees and still wants to be “much bigger” in “two or three of the largest sectors”. 

The fever is real.  BBVA wants to hire 400 staff for its investment banking unit, which would mean adding a franchise the size of JP Morgan’s Paris office to a medium-size Spanish retail bank.  When you think back to how things were even as recently as 2019 it all seems to be a little bit too good to be true.

And it quite possibly is. Now is a good time to be looking at the future and asking yourself – is the level of business in my particular area anywhere near sustainable at these levels?  And if it were to drop, what would the cost base look like?  What sort of bonus would be sustainable in the medium term?

Credit Suisse CEO Thomas Gottstein seems to be asking this sort of awkward question. He said yesterday that “we expect overall pay to come down in 2022 compared to [2021] because there were some excesses, especially on the bonus side … we do not expect, especially on the investment banking side, a repetition of the results we saw in the market in 2021”.  Maybe he’s right?

The idea of looking to the worst performing big bank on the Street for your market forecast might seem a bit strange, but it’s worth remembering that in psychology experiments, it’s usually found that the only people with a realistic assessment of how much control they have over the world are patients with depression.  Credit Suisse might be in the banking equivalent of that state.  Sometimes you need to put the euphoria to one side.

Elsewhere, (but possibly not wholly unrelated?), there’s been a slightly surprising internal career move at Goldman Sachs.  Elizabeth Martin, the global head of electronic equities trading, is going to go and work for Marcus, the retail banking brand.  Not only that, she is relocating from London to Dallas in order to take up the position.

Sometimes ambitious bankers do this sort of thing in order to accelerate their rise up the tree, but it’s hard to explain Ms Martin’s decision in those terms – she’s already a Partner, the highest rank available.  There’s nothing in her biography to suggest family or other connections to Dallas, so it’s possible that she just fancied the change – she’s told Business Insider that “Building divisions and businesses is not something you get to do too often”.

Or just maybe, she’s taken a clear look at the future of the electronic equities trading business and decided that the best place to work is as far away as possible.  Sometimes, smart Goldman Sachs partners can be like bomb disposal experts – if you see one running away, try to keep up.

Meanwhile …

Not so long ago he was the enfant terrible of cryptocurrency who was going to take over Goldman Sachs and sweep away “TradFi”; in the wake of the Bitfinex hack and arrests, Sam Bankman-Fried of FTX is becoming a bit more conservative and saying things like “what this highlights is the need for Federal oversight of the cryptocurrency industry”. (Business Insider)

Nomura continue to expand, hiring Stewart Robinson from Cantor Fitzgerald to help them set up a debt advisory business – it looks like there will be follow-on hires arising from this. (Financial News)

If you’re going to set up as a commodities trader and blow up in a scandal, do it with some style like Ng Yu Zhi.  Five years after leaving KPMG, he was driving the only Pagani Huarya supercar in Singapore, Bulgari were making special trips to visit his wife and his hedge fund was literally named “Envy Group”.  He’s currently on bail awaiting trial and has downsized to an Audi. (Bloomberg)

According to a top Wall Street psychotherapist, the top performers aren’t always aggressive or even extrovert – they’re the people who are able to control anxiety. (Business Insider)

The difference between social media sites in a nutshell: on LinkedIn, you say “private equity media sector exit transaction with high-net worth individual purchaser” while on Instagram you say “Snoop Doggy Dogg buying Death Row Records”.  (Financial News)

The joke is that he’s selfish because he’s a banker.  The authors of the “Alex” cartoon, the Garfield of the City of London, celebrate thirty five years of repeatedly applying their comedy premis to topical situations in the financial world. (Daily Telegraph)

It’s not quite “massive” by investment banking standards, but considerably better than “in line with peers”.  An unnamed partner at EY got total compensation of £4.1m last year, an amount which would have meant they could have paid the firm’s fine over the Stagecoach audit out of their own pocket if they’d wanted. (Financial News)

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