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When you've been earning £485k and you take a pay cut.

Morning Coffee: Indignation of the Deutsche Bank trader with a £21k bonus. Overworked back office staff are ready to revolt

The big difficulty with being a “problem solver” is that every time you succeed, you put yourself out of a job.  That means that for a banker, taking on a problem-solving (rather than business-building) role is akin to taking a trust fall – you might be a very important employee indeed while you’re working on the assignment, but the moment you finish, your leverage is gone and your bonus is dependent on the continued goodwill of whoever promised that you’d be well looked after.

According to a lawsuit filed by Shikha Gupta, formerly a Deutsche Bank credit trader, she was in exactly this nightmare position, and ended up being unceremoniously dropped.  She had been working in Deutsche’s “Non-Core Operations” business unit, a bad bank team responsible for running down legacy portfolios, which was wound up in 2016.  (This shouldn’t be confused with the “Capital Release Unit”, a different bad bank team responsible for running down different legacy portfolios, set up in 2019).  In 2017, she was made redundant, and given a bonus of £21.5k (about $24.5k at the time).

For a high performing credit trader, twenty thousand pounds isn’t really a bonus – it’s what you spend on a bottle of wine to celebrate the bonus.  Gupta was paid £485k in 2016 and claims that she had been promised that she would be paid “more than ever” for joining the team. Admittedly, there was nothing in writing but saying that she “was told management assurances would be honoured”. 

Deutsche, for its part, says that there is “no evidence” of any assurances.  And it’s quite plausible that there weren’t – at the time, the regulations in London were quite clear in forbidding banks from making multi-year commitments on variable compensation.  It’s quite possible that there’s been an unfortunate miscommunication, because it’s very easy to hear what you want to hear in a conversation like this, rather than what was actually said.

Although her time at Deutsche didn’t end happily, Ms Gupta’s career is far from over, and the learning experiences she had in the bad bank might have contributed to her current career as a successful hedge fund manager. And not everyone who goes into a bad bank ends up making themselves redundant.  Deutsche itself recently promoted Richard Stewart from the Capital Release Unit to be Group Treasurer. 

But this is bound to reinforce bankers’ fears about taking a dead-end job.  And – unless it comes out in the court case that there is more to this situation than meets the eye - that will make it that little bit more difficult to staff up a bad bank unit next time.  Presumably, Deutsche now thinks that particular problem is one that it can leave for the competition.

Elsewhere, for every multi-million dollar rainmaker there is always a team of less glamorous employees rushing round struggling to cover the admin and maintain the impression of efficient and frictionless capital.  That’s no less true of wealth management than investment banking, and at Bank of America Merrill Lynch, the house-elves responsible for clearing up after the wizards are beginning to show signs of unrest.

“Client associates” are the staff responsible for onboarding, account reviews, scheduling and the like, and they are finding themselves stretched more and more, often covering as many as five advisors rather than one or two.  They also don’t get as many work-from-home perks, and according to recruiters, they’re “grossly underpaid”.  The real problem, though, seems to be the one that always seems to be there when people start complaining – they feel like they are not respected and “treated like plebes”.  In a people industry, a kind word sometimes is a lot cheaper than filling a vacancy.

Meanwhile …

“Strix Leviathan hires Matthew McBrady” looks like the beginnings of an “Industry” script where someone has made a mental note to replace the obvious placeholder cliches with actual names, but in fact the crypto quant fund of that name has hired the former BlackRock multi-strategy fund manager of that name. (Financial News)

The big question for billionaires – New Zealand or Alaska? A longread on what it is about very rich people and disaster prepping. (FT)

A long term investment is, proverbially, a short term investment that went wrong.  Chris Dixon, the Andreesen Horowitz partner who was chiefly responsible for getting them heavily into cryptoassets, is now saying that he has a “very long term horizon”, as their flagship crypto fund is down as much as 40%.  Another proverb is that if you’ve had a 60% drawdown, you need to more than double your money to break even (WSJ)

The supply and demand imbalance in remote working jobs continues to get more extreme – the proportion of LinkedIn posting offering remote work has fallen from 20% to 14% since February, but these jobs get 52% of all applications. (Bloomberg)

Claudio DeSanctis, the private banking head who moved from Credit Suisse to Deutsche Bank before it became fashionable to do so, is feeling pretty vindicated by his decision. (Finews)

Boutiques are moving into the Middle East – former HSBC, Standard Chartered and BoA banker Andy Cairns has been hired from First Abu Dhabi Bank to be head of capital markets in the region for Houlihan Lokey. (Bloomberg)

SPAC king Chamath Pahalipitaya has looked back on the collapsing valuations, “misallocation of risk”, “broad based manias” and “unbelievable amounts of money from investors who frankly had very few other alternatives because interest rates were zero”, and concluded that on balance, it’s the Fed’s fault (Axios)

Bill Hwang is in court, saying that the government hasn’t proved that there was anything wrong with Archegos’ trading strategies, and that in fact everything he did was pretty normal for an investor who just really liked the stock. (Reuters)

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