Morning Coffee: Barclays contemplating brutal cost cuts in the fourth quarter. Where Goldman Sachs finds hiring stodgy
Lurking in today's Barclays results today are the kind of words you don't want to hear if you're a Barclays employee hopeful of receiving a bonus. In the fourth quarter, the bank says it may incur "material additional charges" as it considers 'actions to reduce structural costs." If this isn't clear enough, the bank also says it's, "evaluating material structural cost actions to help drive future returns" and that it's "focused on cost control" in the corporate and investment bank.
Barclays has already made cuts. There was the annual cull of 5% of the underperformers in its front office in September, even though some of those cut then told us they weren't underperformers. In October, Bloomberg reported that 300 people were being cut at the bank, or 3% of the headcount in the unit, including 50 senior dealmakers, presumably as part of that same process.
The coming cuts, though, sound like a different order of change. 'Structural costs' imply restructuring, in the style of Citi, which is removing five management layers, eliminating 13% of committees and cutting 15% of functional roles.
How much cost does Barclays need to remove? It's aiming for a 60% cost income ratio across the cycle, but the cost income ratio for the full bank was 63% in the third quarter, implying a £194m reduction in costs to hit the target. If the corporate and investment bank (CIB) is to hit the 60% target, most of those costs (£166m) will need to go from there; the CIB-specific cost income ratio was 65% in Q3.
Who's most at risk? Presumably the same sorts of people who've been hosting pointless meetings at Citi. Barclays' bankers and traders outside the US also look vulnerable: in the third quarter, the bank generated 50-60% of its income in dollars but only 40% of its costs. The implication is that US bankers are more efficient than the rest. Earlier this year, Barclays was pushing back into Asia; its Asian bankers may now find themselves at the forefront of a retreat.
Separately, as we reported last week, Goldman Sachs received one million applications for its jobs last year. But there is one of its hubs globally where it seems people don't apply as much. Speaking to Financial News, the co-head of Goldman's Paris office, Marc d’Andlau, said that the Paris "talent ecosystem" isn't as "liquid" as London's. Hedge funds are adding to the competition for people in Paris, said d’Andlau. The implication is that if Goldman gets applications in Paris, it will more than usually pleased.
Barclays just hired Ian Woods, a managing director on the building products team, as a vice chairman in building products and distribution, based in New York. (Bloomberg)
Deutsche Bank and Numis, saying things like: "This is not about cost synergies — it’s about revenue synergies. It reflects a desire to increase our strategic coverage of clients in the world’s second-biggest investment banking market." Also: "The UK investment banking fee pool is at a cyclical low and that makes the transaction easier because it allows time to integrate and get the teams co-operating. So, we can position ourselves for a significant upturn over the next couple of years.” (Global Capital)
Ken Griffin has acquired 20 acres of prime Palm Beach real estate and 'obliterated' the existing homes with intentions to spend between a staggering $150 to $400 million on constructing a mega-estate that will be worth an estimated $1 billion upon completion. (New York Post)
Former Morgan Stanley associate Orkun Kilic is closing his hedge fund which once had $900m in assets under management. (Bloomberg)
Large language models in trading: helping users to find bonds on the network – and outside through natural language queries, reducing the time needed for onboarding users and potentially supporting liquidity and price formation efficiency. (Fi-Desk)
For a brief moment, leveraged finance and CLO bankers were having a good year, but that's no longer the case. (Bloomberg)
Pickles may interact with your gut biome to make you more creative. (WSJ)
How to stop your boss micromanaging you. - Send them a weekly one-pager with the status of your projects. How far along are you on the assignment, and is your progress on track? What work did you wrap last week, and what are the upcoming milestones, or roadblocks you foresee? At the bottom, link to past installments. (WSJ)
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