Morning Coffee: Deutsche Bank believes 22 year-old bankers are its future. Citi's spring-cleaning its junk bond trading systems

Given that Deutsche is meant to be cutting staff in its investment bank, it might be surprising to see that it actually has 265 more front office employees there than it did a year ago.  This is partly a trick of the light – the restructuring announcement back in July was accompanied by a restatement of the divisional numbers which put all the business units being downsized into a “Capital Release Unit,” from which 3,000 people have since gone, mostly of them from the front office.  However, the increase also reflects graduate recruitment.  And that’s been surprisingly strong – the Deutsche Bank analyst class of 2019 is the largest in over a decade at nearly 900 people.

The obvious questions are why is Deutsche doing this, and why are the kids still coming?  The second one is easier to answer than the first.  Although it’s perhaps not as good an investment banking name as it was during the “Goldman of Europe” era, Deutsche is still describable as a “bulge bracket bank”, just about, and as such it still pays banker money.  Although the year’s troubles did affect its brand in the recruitment market, this simply meant that it had 80,000 applications for the graduate program rather than 110,000.

The other question is more problematic.  What do you do with that many kids, particularly when the business they’re being recruited into is so much smaller than it was two or three years ago?  There’s been a trend toward 'juniorization' across the Street, and Deutsche has, out of necessity, been more inclined than most to replace departing employees with internal promotions.  But there are limits to how far this can be pushed, and it hardly stretches down to the graduate program.  It does seem quite possible that the Deutsche 2019 analysts will find that they are given more responsibility, earlier in their career than they might otherwise have been.  But if this is a consequence of having to fill holes in the upper ranks, then who is going to train them into these new responsibilities?

Deutsche might simply be planning ahead for higher attrition in its analyst ranks.  With an uncertain bonus outlook and questions remaining over the viability of some business lines, you might expect to see some of the 2019 class more or less explicitly taking a job at Deutsche to get a foot in the door before moving on.  That would be good news for them, but bad news for Deutsche – since the acceptance rate for its program has gone from 0.7% in 2018 to 1.1% in 2019, it can hardly afford to have its best graduates further thinned out by poaching.

The more optimistic possibility is just that Christian Sewing and James von Moltke see a future in which the bad times are over and Deutsche Bank needs the headcount once more.  The analyst class of 2019 is the VP class of 2024, and a lot can change in five years.  As the song goes, teach them well and let them lead the way, give them a sense of pride, and who knows?  Deutsche might find once more that learning to love itself is the greatest love of all.

Elsewhere, having shut down CitiCross in equities and substantially culled the prime brokerage client list, Citi seems to have got something of a taste for getting rid of unprofitable trading relationships.  At the moment, it maintains a presence on 45 different FX platforms (systems like FXall and 360T which bring together quotes from different providers).  From next year, it wants to bring that number down to 15.  The business logic is pretty clear, as there are plenty of subscale systems out there, and in any case, all trading banks want to drive clients onto their own proprietary systems.  But it’s quite surprising to see a top three FX house willingly give up even a tiny amount of market share, particularly when the market is so competitive that even a small loss of relatively unprofitable flow business could mean dropping a few league table places.  Citi has displayed unusual willingness to grasp this sort of issue over the last year.

Meanwhile …

Raising the bar in terms of making a financial career compatible with family life, Standard Life Aberdeen is offering 9 months of parental leave on full pay to both men and women. (Financial News)

Jho Low is ready to settle with the US authorities for $1bn of civil restitution in the 1MDB case, the majority of which seems to be made up of the appreciation of value of some of his private equity investments while they were being held in frozen accounts (Bloomberg)

““Banks and other financial services haven’t really been spending R&D money. What they’ve spent money on before is developing new products for customers.  Now we need to move our thinking along to allow some people within the firm to dream a little”.  Samik Chandarana, head of data and analytics at JP Morgan, gives his views on AI and machine learning (Bobs Guide)

Pierre who?  In a press conference which was understandably dominated by “Spygate”, Tidjane Thiam claims that Pierre-Olivier “POB” Bouée, although a trusted lieutenant who had moved with him from McKinsey and Prudential, wasn’t a close friend and had only eaten dinner with him once in the last four years. (Bloomberg)

It’s been a truism for years that hedge funds are all about raising money, not managing money.  Now that’s reflected in the labour market too; although assets have been falling in the industry, specialist recruitment firm Jensen Partners still sees strong hiring for hedge fund marketers. (Institutional Investor)

The most Norwegian-looking man in Norway, Yngve Slyngstad, has crossed the $1trn AuM line and decided to retire from his post as CEO of the sovereign wealth fund (Bloomberg)

Interesting profile of Marilyn Ceci, JP Morgan’s head of “green bonds”, although the evidence for referring to her as a “warrior” or “greenie” rather than, say, “an investment banker” is pretty thin. (Ethical Corporation)

Another profit warning from De La Rue plc shows that having a license to print money is anything but a license to print money (Bloomberg)

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