Morning Coffee: So, now Morgan Stanley is cutting 3,000 jobs too. The bank CEO who gets up at 4.30am and works 12 hours in the office
Although Lazard's cuts are numbered in the 100s and won't amount to much at all in London, there was much in last week's Lazard investor call to give junior investment bankers the fear. - The "deterioration" in the external environment, the bald statement that there's no sign of "bouncing back," the admission that higher junior banker salaries are causing a problem. And now there are signs that Morgan Stanley feels the same.
Bloomberg reports that Morgan Stanley is preparing to cut 3,000 people, or 3.7% of its 82,000 workforce. Employees in the wealth management division will be spared; investment bankers and traders will bear the brunt of the blow. The new cuts come after Morgan Stanley cut 1,600 people before Christmas. But the bank will still have trimmed less than 7% of its workforce, compared to cuts of 10% at Lazard. The latest cuts will put Morgan Stanley on a par with Goldman Sachs, which cut 6.5% of its people in January.
Morgan Stanley's M&A bankers had a feeble first quarter, with revenues declining 32% year-on-year, second only to the 57% decline in M&A revenues at Credit Suisse. Morgan Stanley's revenues in all other areas (fixed income trading, equities trading, equity and debt capital markets) also fell, but not by as much. Profits in its institutional securities business, which houses the investment bank were down by a third year-on-year.
Pre-Christmas cuts aside, it's been a while since Morgan Stanley culled quite so many staff. When it removed 1,200 people in 2015, around 470 of them came out of its fixed income trading division. This time, the cuts are likely to hit investment bankers hardest. The Financial Times notes that CEO James Gorman said investment banking activity remains "very subdued" and might not recover until 2024 in the bank's recent investor call.
Separately, if you hadn't noticed already, bank CEOs love to be in the office. Gorman, David Solomon at Goldman Sachs and Jamie Dimon at JPMorgan have all waxed lyrical about the importance of getting people back there. It should come as no surprise, therefore, that Barclays CEO C.S. Venkatakrishnan is also a fan and is often at his office desk for 12 hours a day.
In an interview with the London Times, Venkat said his typical daily routine entails getting up at 4.30am and doing an hour of yoga and meditation before heading to the office for 6.30am. He typically arrives back home at 7pm and it's not clear whether he continues upon his rearrival.
Venkat, who is recovering from cancer, said he doesn't drink much alcohol, and prefers sparkling water. He worked through his cancer treatment, “five days a week, six hours a day,” and says he's emerged with a new faith: “It teaches you empathy, it teaches you hope. It teaches you about teamwork, and that you can rely on people more than you think."
Jane Fraser, CEO of Citi is making ambiguous noises about job cuts in the investment bank: “Like every institution, you make some adjustments around the capacity, but we’re playing the long game in investment banking. The second half is not going to be as strong macroeconomically or in terms of investment-banking wallet and the like that we had hoped.” (Bloomberg)
But Deutsche Bank wants to hire investment bankers. “We are investing in advisory, which is a high-returning business. Being in M&A and ECM is key...We are at a multiyear cyclical deal-flow low point right now, and with the market poised to rebound in 24, 25 and 26, this has created a great opportunity for us to invest in and attract talent.” (Financial Times)
JPMorgan had been trying to build in First Republic's territory for a few years. In late 2019, it began a push to add more wealth advisers for people who aren’t as rich as the clients of its private bank. (WSJ)
On closing the deal for First Republic, JPMorgan will book a gain of $2.6bn, most of which will be eaten up by $2bn in expected restructuring costs. JPMorgan is writing down First Republic's $173bn in commercial loans and residential mortgages by about $22bn as it takes them onto its own books. Around $22bn in other liabilities are being left with the FDIC. (Bloomberg)
Credit Suisse is handing out retention bonuses to the staff it wants to keep. (Bloomberg)
Tom Naratil is indeed returning to UBS after only a few months' retirement. (Bloomberg)
If the British Labour Party wins the general election next year, it will tax carried interest like income. (Financial Times)
Deutsche Bank's head of HR bought some bonds days before the bank reported earnings. (Reuters)
Jonathan Scott-Lee, the neurodiverse head of M&A execution for HSBC technology in Canada, has written about understanding of neurodiverse school pupils after his 16 year-old daughter took her own life at a British boarding school. (The Times)
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