Morning Coffee: Tragic death of 27-year-old Goldman Sachs analyst. The Bank of America trading desks that have doubled in size and are still growing
The normally irrepressible finance meme accounts interrupted their stream of humour yesterday, as the terrible news came through that John Castic’s body had been found in Newtown Creek, half a mile away from the Brooklyn Mirage nightclub where he was last seen. Castic seems to have been a follower of most of the big meme accounts, and apparently occasionally interacted with some of them. In other words, a completely normal twentysomething banker from New York.
In many ways, the very normality is unnerving. John Castic happened to work at Goldman Sachs, whose security office said they had been doing what they could to help with the search and support his family. But other than that, this awful event doesn’t seem to have anything to do with banking at all. In fact, another young man with no connection to the banking industry died two weeks ago in similar circumstances – the police haven’t suggested either death is suspicious so far, but people have made connections and are warning each other to be careful.
Bankers are humans too – they live and have friends in the city, they go out, and sometimes horrible things happen to them. There’s no moral to some stories, other than to remember that anything can happen at any time, so try never to part with harsh words.
More cheerful news elsewhere – Bank of America is committed to continuing to expand its fixed-income trading business, particularly in Europe. This is despite having a hiring freeze and despite having grown significantly already over the last couple of years. The currency and commodities salesforce, for example, has doubled in Europe since 2021, while several other teams have seen 50% growth in headcount.
One reason why BoA is content to keep increasing this investment is that it’s done well for it so far. An 8% increase in the expenses of the Global Markets Group overall for the last quarter was able to drive a 24% increase in fixed-income trading revenues. According to Jim DeMare, the president of global markets, the aim is to “close the gaps to our main rivals” and to diversify revenues from the domestic franchise that has historically dominated BoA’s income statement.
This is quite an interesting strategic call to have made. Other banks, including some of the biggest incumbents in these markets, have been trying to move in the other direction; to reduce the importance of volatile and capital-consuming trading revenue and increase the proportion of “stable” loans and deposits in the business mix. Up until not so long ago, those “gaps” between BoA and the rest of the bulge bracket might have been seen as strategic advantages, evidence of better quality earnings.
But it could be argued now that “quality of earnings” was always a strange concept – money is money, it doesn’t come in degrees of quality. Trading revenues can be volatile, it’s true, but that volatility is two-sided; they can make huge losses like in 2008, but they can also save the day as they did at the start of the pandemic. It’s easy to get used to a decade-long period of low and stable interest rates, and to consequently believe that fixed income trading is intrinsically a terrible industry. That’s a view which might have been significantly updated over the last eighteen months.
A kinder, gentler Apollo? Not so long ago, the private equity giant had a pretty terrible reputation as a place to work – co-founder Josh Harris was famous for sending emails on Saturday mornings and expecting a reply within ten minutes. But Harris lost out in the CEO succession battle to Marc Rowan, and Marc is now wearing sweaters, talking about diversity, allowing people to call him “Professor” and displaying worryingly many of the indicia of having gone soft. This is partly for business reasons, of course – Apollo has a bit of a reputation for dealing roughly with counterparties too, which has become a liability to be shed now that it’s expanding into new markets. But surely it can be hoped that if top management are spending every day pretending to be nice guys, it will be that much harder to be mean to the employees? (Bloomberg)
The Goldman Sachs Partner Family Office is the team which handles the affairs of current and retired Goldman partners and MDs. As such, it might be the single most well-informed (and therefore frightening) client group in the global private banking industry. Lisa Opoku, the head of this division, has now left the bank; presumably her next challenge will feel comparatively restful. (Reuters)
There is apparently somebody out there pretending to be a recruiter from Evercore and making phony offers of employment as part of a phishing scam. So be careful, although if you ever find yourself seriously considering handing over payment to someone who’s just cold-called you, that in itself might be a sign that you’re not really in the running for a job at Evercore. (Financial News)
Michael Klein continues to pile up the Ws (after the considerable L of the Credit Suisse First Boston job which never happened). He’s now launching a SPAC with the brother of a member of Take That, of a roll-up investment company that buys up small companies that don’t want to sell to private equity firms. (FT)
The former chief executive of hedge fund Highland Capital is asking for a judge to be recused in a court case because he thinks that the villain of one of her novels is based on him. (The Times)
A NatWest banker who was fired after getting cancer has won her case at an employment tribunal, but the award made was only £88k ($114k) versus the £2m claimed. The judge appears to have said that she was already earning “significantly more than the market value for the job” in a contractor post at Credit Suisse, which must have been pretty hard to hear. (Financial News)
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