Morning Coffee – Barclays bankers try to make a last-minute bonus save. The boyband veterans of banking
A new gambit seems to have opened up in the battle over 2023 bonus pools. At Barclays, “top bankers” (unnamed, but it seems unlikely that this would have happened without at least some involvement from Cathal Deasy and Taylor Wright) have lobbied to delay the compensation committee’s final decision, to reflect “business they won in recent days or expect to win”.
They can do this, because unlike the US bulge bracket, Barclays announces its bonus pool in February. But it’s a really interesting strategy that might say quite a lot about the kinds of discussions that must be going on at every bank on the Street.
On one hand, the category of “business we have won in recent days or expect to win” seems a bit … these two things are not quite the same. If the Barclays bankers were just trying to do what capital markets & advisory units always do in a bad year, and claim that they need to be paid up to reflect the recovery that’s just around the corner, then that wouldn’t be so significant. It would just reflect the fact that although Venkat has publicly committed to keeping the investment banking business unit as a core part of the strategy, he also seems to have told them that they’ve got to get the capital consumption down, and you can’t realistically build up an advisory franchise while losing your advisory bankers.
But if they are really saying that – very much out of the seasonal norm – they are still landing deals with less than three weeks to go in the year, then that would be very interesting indeed. Even the reference to “business we expect to win” shouldn’t necessarily be dismissed too cynically, because the revenue will either arrive or it won’t. And if it doesn’t, then not only will it not make any difference to have delayed the bonus pool decision, but the bankers who claimed that it was practically guaranteed will have lost a lot of credibility for no real purpose.
So is there really a recovery just round the corner? It certainly could be the case. One of the reasons why December is typically the deadest of dead months during a market downturn while January is one of the busiest months of the year is that bankers have a certain amount of influence over the timing of deals. There is no point throwing good revenue at a lost cause, so most of the time, it’s better to postpone a deal which might have closed in December, to let it contribute to the next year’s bonus pool.
Which would imply that if the bankers suddenly realised that they needed to do so – perhaps, because the compensation committee was heading toward conclusions which would make it difficult to avoid long term franchise damage – there might be a surprising amount of revenue that could be pulled back forward, either into the current year or early in 2024. Barclays’ bankers might be showing us that across the industry there is potential for a strong start to next year. If so, good luck to them when next December rolls round and they will want to count the same revenue twice.
Elsewhere, Goldman Sachs continues to push its program to hire military veterans (who will presumably learn to call themselves “military alumni” because it sounds classier). According to Matt Gibson, a former US Navy officer and head of the client solutions group at Goldman, “We don’t have to teach them the importance of discipline, or being on time or teamwork, or any of the things that you need to be successful”.
Which sounds fine. But, of course, it’s possible to get valuable life experience and training outside the military. Being in a 1990s boyband, for example, also teaches you about discipline and the importance of teamwork. James Hearn, head of asset management at Globalearn, was one quarter of floppy-haired also-rans “Ultra”, where he presumably learned not just how to be on time, but also in time. Since they also get experience with surviving on hardly any sleep and being ordered around by self-important managers, boyband alumnae might make very good investment bankers. Or vice versa – perhaps the world is ready for a fresh-faced quartet from Goldman Sachs called “Pls Fix”?
While other firms fret about the capital consumed by trading (and several US CEOs are on record as complaining bitterly about the new regulations), Bank of America is continuing to back Jim DeMare’s successful franchise. (Bloomberg)
There is apparently a Sam Bankman-Fried shaped hole in the world of crypto trading, and a surprisingly large number of competitors are rushing to be the ones to fill it. (WIRED)
Andrea Orcel knows how to keep his investors happy with big share buybacks. He has also now largely managed to get rid of most of the legacy management layers from his predecessor Jean-Pierre Mustier’s time, in a reorganisation surprisingly similar to Citigroup’s. Orcel appears to have a particular dislike of co-head structures. (Finews)
European stock exchanges have some of the longest trading days of any in the world. Now a movement is building in Sweden, following a book by Goldman Sach’s Jina Zachrisson, to reduce those hours, to improve gender equality and work-life balance. (Bloomberg)
It seems that even at the banks which took the hardest line on returning to the office, there’s a grudging acceptance that a degree of remote working is likely to remain. (Financial News)
J Pierpoint Morgan was so rich that “former homes of JP Morgan” come to the market quite often. But Denham Place, his English countryside retreat, is able to boast that it’s the only actual palace (apart from ones owned by the royal family) within 30 minutes commute of central London, possibly less if you use the helipad that’s attached. If you’ve got £75m to spare in January and are looking for a place to do your Zoom calls from, it might be worth a look. (Daily Mail)
A very happy festive season and a prosperous New Year to all our readers. Morning Coffee will return on Tuesday 2nd January
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