Credit Suisse bankers want to stay. Goldman bankers want to go
It's been going on for a while now, but following last week's restructuring announcement and the elevation of Michael Klein to the role as head of CS First Boston, headhunters say many Credit Suisse bankers have become very excited indeed.
"People are interested in seeing how much stock they get in the spinout," says one London headhunter. "No one is going anywhere until that's become clear."
Speaking at last week's announcement of the new plan, CEO Ulrich Körner indicated that CS First Boston could make some of its employees very rich, and not just Klein himself, who is getting a "substantial share" in the venture according to the FT.
The new bank will be able to reward all employees through a partnership model, said CEO Ulrich Körner. “It will be more global and broader than boutiques, more focused than bulge bracket players,” he added. The proposition is already generating excitement among "talent" Körner added.
That people are excited is a good thing. But there is also plenty of uncertainty around the new structure. Credit Suisse is cutting 2,700 people before Christmas, and many of those cuts are expected to be in European corporate finance. Körner indicated last week that CS First Boston will pull back from European ECM and DCM and focus solely on M&A in EMEA. One European capital markets headhunter says bankers at Credit Suisse in London seem strangely untroubled by this prospect: "Amazingly, there's no panic. Everyone wants to know the spin-off details and they all seem to think they'll get massive amounts of stock options."
Credit Suisse bankers are "always too optimistic," he adds. "I'm pretty sure that the panic will come." A US headhunter who's been trying to move Credit Suisse people for a while complained even before the announcement that they'd become "delusional:" "None of them think they'll be impacted by the restructuring."
Credit Suisse bankers now more bullish than Goldman's
One outcome of the current situation is that headhunters say bankers at Credit Suisse have become harder to move than bankers at Goldman Sachs.
"At Goldman we have noticed a growing number of senior bankers making gentle enquiries about the way to the door," says Barney Mundell, partner and co-founder of search firm Loxley Partners. Goldman bankers fear that the next 24 months will be "flat at best," says Mundell. If they move soon, Goldman people might be able to lock in bonuses at last year's elevated levels. Hence their enthusiasm for collecting bids from the market.
The CS First Boston naysayers
While CS First Boston is the new shiny guest coming to the banking party, some insiders at Credit Suisse are already expressing doubts. After losing 69 senior bankers last year, followed by Jens Welter, the London-based co-head of global investment banking to Citi in September, the doubters suggest the new bank will start life depleted of some of Credit Suisse's best people.
New managing directors probably wanted
Credit Suisse declined to comment for this article, but the bank has already been hiring. - In June, David Miller, who's been heading investment banking and capital markets at CS, said the bank had added 55 MDs since last year's exodus. Nonetheless, naysayers say the business that will soon become CS First Boston still looks too focused on leveraged finance and financial sponsor coverage and lacks broad strength across M&A. "This is a bunch of leveraged finance and sponsor bankers masquerading as M&A bankers," says one senior insider, speaking off the record. "The idea that it will be capital light is a kind of laughable."
Dealogic says CS ranked outside the top 10 globally for tech M&A, healthcare M&A and real estate M&A for the first nine months of 2022. More promisingly, the Swiss bank came in eighth for utilities and energy M&A and recently won a role advising on the $24.6bn deal between US grocery companies Kroger Co and Albertson's. It also ranked 7th for global M&A and ECM. In leveraged finance, however, it came fifth, an achievement that may prove a poisoned chalice as leveraged deals sour. The bank was already struck by $120m of markdowns on leveraged loans in the third quarter.
Maybe the gaps in the M&A league tables don't matter. Last week, Körner said the new bank won't be chasing rankings. Four months ago, though, Miller said he still wanted to hire 40 new MDs globally, particularly in technology and healthcare, presumably to fill the gaps.
Ultimately, insiders say CS First Boston is more likely to become a Jefferies than a Centerview or an Evercore. The new firm will seemingly run a corporate finance and leveraged finance business in the US and Asia, but a pure advisory business in Europe. It may even pay like Jefferies, with a lot of cash for junior staff but harsh clawbacks for anyone that leaves.
While CS First Boston will be based in New York, Klein himself has strong links to the Middle East. As the new bank hires, bankers who want to build ties with Saudi Arabia may be among its most enthusiastic new recruits.
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