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There's not going to be a mass retrenchment.

Morning Coffee: Boss tells young Citi bankers they won't all be let go. Former Credit Suisse CEO explains how it wasn’t his fault

With eleven months gone of a distinctly forgettable year for the investment banking industry, we’re going into the season when senior executives like Leon Kalvaria of Citigroup start making a list, checking it twice and then deciding who’s going to get a big bonus and who is going to get fired.  This time last year, banks were talking about “paying for retention, not just performance”; this year, not so much.

It will matter very much to those who end up getting bad news next year whether the layoffs are perceived as being related to the general drought of deals and readjustment of revenue expectations, or whether they’re seen as an extension and return of the usual “rank and yank” of poor performers.  There’s little disgrace in being made redundant in an overall reduction driven by macro or regulatory factors – the people let go by Credit Suisse are by all accounts not finding it too difficult to get hired elsewhere.  But someone who has been fired for performance issues generally needs to be very lucky to get back into the industry.

Leon Kalvaria, chairman of the Institutional Clients Group, seems to be indicating that for Citi at least the cuts won't be widespread. There will be no "mass retrenchment," says Kalvaria. There will, however, be “some level of right-sizing.” Kalvaria doesn't say who will be right-sized, but the supposition might be that they will be underperformers.  

Young Citi bankers who want to impress their elders at this crucial time might be well advised to hit the history books.  According to Alison Harding-Jones, the head of EMEA M&A and vice-chair of the investment bank, there are “people who come to me who are starting to think about being made a managing director in an investment bank who started in this business in 2010 or 2011, and so they’ve never really seen an environment where money hasn’t essentially been free or very, very cheap”.  She, and other “old heads” thinks that this means that the younger generation in banking believe some bizarre things about what constitutes a normal market environment, and that they “will learn a lot”.

An environment in which top bankers are grumpy about their younger colleagues’ general attitudes, and one in which the kids are out of touch with the market rather than their elders could be dangerous for millennial bankers, particularly if lists are being compiled to right-size in the new year.  It might be good advice to follow the example of smart eight-year olds all over the world, and to start being ostentatiously helpful and well-behaved.

Elsewhere, as some wags have put it, the most disastrous hedge at Credit Suisse over the last five years was the one that Iqbal Khan put up next to Tidjane Thiam’s house (an argument over which was apparently the catalyst for the catastrophic feud which ended up leading to TT’s resignation as CEO).  Now Tidjane has given a rare interview, in which he denies any feeling of schadenfreude and claims that he’s “proud that none of it happened on my watch”.

It is strange thing to consider that CS bankers might look back to early 2020 as the good old days, but the share price chart certainly suggests that’s what they were.  And TT makes a good point that a lot of the grumbling of that time had pretty unpleasant motivations – “certain segments of the German-speaking press” had it in for him from day one, and CS has formally apologized for some aspects of the way he was treated as CEO.

But is he really so removed from the problems?  It’s hard to preach too much about “risk culture” when your own most recent venture was a SPAC. Thiam’s “dream client” was Luckin Coffee, which turned out to be a disaster and having set the direction of the bank to be geographically focused on Asian growth and strategically focused on integration between private wealth and investment banking, he can hardly say that Archegos was an anomaly. 

Perhaps he ought to lean into the original scandal from 2020.  The immediate cause of Thiam’s departure was the revelation that CS had hired private detectives to conduct surveillance on some of its executives.  It could be argued that it might have saved some trouble by hiring a few more spies to check up what its bankers were doing.

Meanwhile …

He’s back!  Tom Montag, the larger-than-life former investment banking head at BoA, will be CEO of Rubicon Carbon, a company launched by TPG to raise money to invest in carbon credits and to improve the quality of the emissions trading market.  The chair of the new company will be Anne Finucane, so it’s a sort of reunion of people who were cleared out of the line of succession at BoA. (Bloomberg)

Updating the list of what’s hot and what’s not in terms of programming languages for finance – Python, SQL and C++ are still there, but Tableau, Rust and Go are also in demand (Business Insider)

Bankers just put their stuff into a cardboard box and shuffle through the lobby, but tech employees are increasing filming the moment at which they find out they’ve been fired for TikTok content. There is some heavy emoting. (Bloomberg)

Is this the most envied job on the sell side?  Noble & Co have an analyst responsible for writing reports on the potential of scotch whisky as an investment (Press and Journal)

There seems to be some hiring business going on in Qatar as the World Cup progresses – JPM’s former COO and CFO of the global FICC business, Niall Byrne, has been recruited to the Qatar Investment Authority. (Bloomberg)

Poachers turned gamekeepers – two of the directors of bankrupt crypto lender Celsius have launched a new firm, aimed at helping fintechs to install exactly the kind of “grown up” systems and controls which their previous venture didn’t. (Financial News)

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AUTHORDaniel Davies Insider Comment

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