Morning Coffee: Goldman Sachs’ ex-investment bank head explains why Citadel Securities is special. Anand Selva’s score at Citi
One of the most magical periods in any banker’s career is the wonderful honeymoon period when you’ve just started at a new job, you haven’t made any enemies yet, and everyone’s pleased to see you. All the things which will one day become annoying seem interesting and cute. Jim “Espo” Esposito is in that zone right now – after six weeks as president of Citadel Securities, he’s found out where the men’s room is and where to file his expenses claims, and he’s giving interviews about how much he likes the new place.
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Espo is careful to avoid anything that might give offence to his former colleagues at Goldman Sachs, where he was very well-liked, but apparently felt like he was treading water. When asked by Bloomberg yesterday whether he’s now excited to compete with Goldman, he quickly changed the subject to all the great partnerships that Citadel feels like it can strike with big banks to help manage their trading risk.
Esposito did note, however, that Citadel Securities writes more “tickets” for trades than anybody else on the Street despite only having 1,700 employees. Someone absolutely determined to find shade in his comments might have seen this as a little dig, as it’s a slightly sore point that profit per employee is so much higher at the specialist market making firms than the bulge bracket.
His comments about the talent at Citadel could also be taken in a spirit other than that in which they were intended. Although Espo claims to have met “more PhDs and Math Olympians in the last six weeks than in my whole career”, this might also mean that while he was at Goldman he wasn’t looking out for them – GS employs plenty of both. But at Citadel, the tech stack is absolutely core to the business and other kinds of banking expertise more peripheral. Put it this way – the Goldman Sachs corporate chess team probably has more to fear from Citadel than the golf or lacrosse teams.
That doesn’t mean that Wall Street shouldn’t be scared of Espo, thought. While smiling and talking about partnerships, he also observed that Citadel Securities is building out its credit trading business, where it's applying the knowledge it's gained from its strength in equities. Several analysts, including the team at Barclays, are taking this threat very seriously; more and more products are seeing a rising share of electronic trading, with more or less disastrous consequences for headcount and for the earning prospects of people who don’t have math PhDs.
It's always been a saying on Wall Street that the most dangerous place to stand is between a guy like Jim Esposito and some money that he wants. He may be able to turn on the charm, but it would be a big mistake for anyone to confuse his good nature for lack of ambition. Goldman Sachs may be about to find this out.
Elsewhere, Anand Selva, the COO at Citi, is something of a folk hero to back office workers and Citi’s Indian employees, having risen through from an assistant operations manager in Chennai in 1991 to the C-suite today. Selva has now got one of the toughest jobs in the bank – overseeing the “Transformation” program, which is meant to repair the bank’s rickety data systems and get it out of what analyst Mike Mayo calls “regulatory purgatory”.
It's a bumpy ride. Citi was fined $136m in July for failing to resolve its data issues and Business Insider suggests Selva's transformation efforts were seen as needing attention even last year. An internal committee at Citigroup reportedly gives Transformation something like an annual exam grade. This fell from 94% in 2022 to 80% in 2023.
According to insiders, part of the problem is that Selva is well regarded as a numbers and systems guy (although not a coder himself), but doesn’t seem to run a very happy ship. The transformation team has been described as “cliquey” and unreceptive to bad news.
Still, Jane Fraser clearly rates and trusts him, having promoted him first to run her old Global Consumer Banking business and then to the COO role. As long as you’ve got a few loyal friends in banking, and as long as one of them’s the boss, you’re likely to have a good career.
Meanwhile …
HSBC wants to cut $300m from costs, mostly by removing senior bankers. (Financial Times)
When Credit Suisse's securitization team moved to Apollo they had a shock. Apollo's "hard driving culture" and late night calls were seen as unreasonable. Jay Kim left in August, by mutual agreement. (Bloomberg)
Potentially very good news for some UK bankers. Before the EU bonus cap was introduced, the UK thought it had dealt with the issue by having some of the strictest rules in the world about deferrals, clawbacks and guarantees. Now the cap is gone, and regulators are beginning to revisit some of those past decisions, too. (Reuters)
Their counterparts in the Netherlands will be crying into their Heineken, however, as the Dutch Parliament has voted not to pursue any review of their cap on bonuses at 20% of fixed income. (Dutchnews)
“Regulatory purgatory” can be a real problem – Bank of America is being taken off deals in India simply because of being under investigation over allegations of bad practice in block trading. (WSJ)
Metals trading has historically been a poor cousin of the commodities business, but oil traders have had such a good couple of years that the big firms are diversifying, and consequently trying to hire top talent from the metals world at oil-trader rates. (Bloomberg)
If you’re a vice president earning decent six figures but still have some student debt, don’t have quite the house you’d like and your investment portfolio is nowhere near retirement level, then the marketers have a new acronym for you. You’re a HENRY – a high earner who’s not rich yet. (WSJ)
The bragging rights associated with being identified as the real Satoshi Nakamoto (the pseudonymous inventor of Bitcoin) would be considerable, but so would the hassles – the Satoshi account has a very large Bitcoin stash that would make them an obvious kidnapping target, if nothing else. So it’s not wholly surprising that Canadian developer Peter Todd is completely denying it, having been identified as Nakamoto in an HBO documentary. (BBC)
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