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Reeling in expectations takes on a whole new meaning.

Morning Coffee – Fish and football are the ways that bankers can still get bonuses. Should fintech workers be running for safety?

Most M&A bankers would agree that the last twelve months have been pretty terrible, and that the next year doesn’t look all that much better.  Apart from the slightly Pollyannaish “dry powder” thesis which holds that private equity will come back to the rescue as soon as interest rates fall, there’s really very little visibility on when deal flow might return.  It’s quite dispiriting.

But “most” doesn’t mean “all”.  There are some firms that have had a great year and see nothing but blue skies and busy calendars out ahead.  Firms like Mar Advisors and Pareto Securities.  Bankers like Henning Lund, Magnus Bjarnson and Jon Gardar Gudmundsson, who are saying things like “It is becoming increasingly complicated for companies in terms of structure and reporting, and companies need size to operate well and develop”.

You might not have heard of them? That’s because these are the leading lights of investment banking in the seafood sector, where consolidation in the salmon farming industry meant that overall deal numbers were up 27% in 2022, and where the takeover of NTS by SalMar in Norway set sector records at the equivalent of $1.7bn.

This might not be all that much comfort to most coverage banker on the Street – they can’t really relocate and change sectors to swap FIG for piscine protein, and even if they did there’s only a limited amount of market share to round.  The Scandinavian bankers who did well out of the seafood this industry are literally big fish in a small pool.

But there’s a lesson of more general importance – even in the worst conditions, there’s always a niche that’s doing well.  It was also a great year for RedBird Capital, the private equity firm that owns AC Milan and which hasn’t had any trouble at all finding funding and making exits at attractive prices.  They’ve actually done so well that the boss, Gerry Cardinale, is now raising more money to carry out roll-up mergers and build a financial services firm.

Of course, every niche has its own business cycle, and the fact that these particular little areas have struck gold this time doesn’t mean that they won’t go through lean years of their own.  But one of the advantages of being small and nimble is that you can sail to where the fish are biting (or run to where the ball is bouncing) and adapt your own business to market conditions.  That’s why Centerview partners were able to pay themselves so much better this year than their big bank counterparts, and in general why boutiques are the preferred habitat of bankers who are genuinely confident in their own ability to make the rain.  Understanding the industry cycle is important if you want to have a prosperous career, but best of all is to make your own luck.

Applying that general theme to a different market, there are divergent views on the relative attractiveness of fintech versus traditional finance right now.  If you listen to Bloomberg, then “Big Banks Will Show Fintech Who’s Boss”.  For Business Insider, on the other hand, “All the billions in the world can’t help Wall Street crush its digital rivals”.

The two points of view aren’t necessarily as far apart as they look.  Fintech supporters like Robert Ruark of KPMG choose to focus on issues of culture and        bureaucracy.  He says that “Banks are much larger and more established, heavily regulated, highly bureaucratic, technologically lagging, and focused on shareholders” while “Fintechs, by contrast, are autonomous, lean, entrepreneurial, lightly regulated, and technologically advanced”.

Paul Davies at Bloomberg doesn’t really address this question – he makes the simpler point that all the cultural advantages in the world can’t substitute for running out of money.  He’s particularly concerned about the outlook for fintech lenders, many of which have grown rapidly in a low interest environment, and which are now moving into the part of the business cycle where they will find out how good their proprietary algorithm really was.

The question that fintech employees really need to be asking themselves right now is whether their company is really in a niche which (like fish or soccer) can credibly expect to have performance that’s completely independent from the general environment, or whether they’re really just a small bank with a cool app.  If the honest answer is the latter, then it might be worth looking for a tactical career move to sit the next few interest rate moves out in a boring incumbent.

Meanwhile …

Of course, not every firm that had a great 2022 was a small niche player – Citadel declared record revenues on both the hedge fund and securities trading sides. (WSJ)

The US Federal Trade Commission is proposing a ban on non-compete agreements, which could help job mobility in the tech industry. (Bloomberg)

They used to say that the easiest way to rob a bank is to own one.  Nowadays, it’s much easier to set up a crypto exchange if you want to get hold of other people’s savings, and the practice of walking into a bank with a gun and taking the money is almost a dying art.  There is less cash to take and exploding dyepacks make it much more difficult to handle; robbers have instead taken to blowing up ATMs. (Finews)

Chris Raff has taken a walk down Boutique Boulevard – the former Deutsche Bank head of UK M&A is leaving for Moelis. (Financial News)

Anna Sacks used to be an analyst at Asia-focused corporate finance boutique BDA Partners (for slightly more than a year, so she’s “a former investment banker” in profiles). Nowadays, she is “The Trash Walker” of TikTok, posting videos of the extraordinary amount of valuable designer goods and antiques thrown into dumpsters by retailers in New York. (Twisted Sifter)

There’s nothing quite so wholesome as a profile of a successful banker in their hometown newspaper, brimming with pride at the local kid made good.  In this case, Bank of England CFO Afua Kyei. (Yen.com)

If you want to relive one of the Street’s greatest scandals, the four part Bernie Madoff documentary is now on Netflix. (Esquire)

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