Morning Coffee: What if it’s all for nothing at Credit Suisse? The law firm for women on Wall Street
It's the morning after, and there may be some headaches at Credit Suisse. After yesterday's sometimes sombre, sometimes tub-thumping exposition of a new world in which Credit Suisse throws its securitized products group to the private credit wolves, does away with all its European ECM and DCM bankers and its emerging markets traders, and becomes 'like a Swiss mountain', people at the bank are waking up to a dramatically lower share price.
Credit Suisse shares fell 19% yesterday following the unveiling of the new plan. One shareholder told the Financial Times that the deal to give away 10% of the bank to Saudi National Bank for CHF1.5bn was "painful." A Jefferies analyst said the “deterioration in momentum" in Q3 was already "concerning." Mostly, though, there was the feeling that even after all the changes, Credit Suisse won't be in a great place.
Credit Suisse says it will make a loss this year. It will also make a loss next year. In 2025, it thinks it will make a profit. And when that happens, it aspires to make a return on tangible equity (RoTE) of only 6%. Deutsche Bank is three years into its own restructuring and is already achieving an RoTE of 8.2%. Credit Suisse's aspirations were derided as"lowly" by analyst Andrew Coombs at Citi.
There are also concerns over how the spinout of the advisory business into CS First Boston will work in practice. Bloomberg's Matt Levine points out that multiservice investment banks evolved for a reason - getting clients to do deals usually means helping them fund those deals, and this means helping them sell stock or bonds, which in turn is facilitated by employing people who buy and sell stocks and bonds every day and who understand the markets. This is why banks have sales and trading arms. Under its strong-as-a-Swiss-mountain plan, Credit Suisse itself still have a sales and trading operation and those salespeople and traders will work with the newly independent CS First Boston, but the two will be separate and the Credit Suisse markets business will usually only work with wealth management clients. It doesn't sound ideal.
Worse, the ownership structure for CS First Boston and the extent to which Credit Suisse will remain on the hook for any losses relating to the leveraged finance unit, remain unclear. It's not inconceivable that Credit Suisse could be called upon to bail the unit out, says Bloomberg. Nor is it without precedent: Credit Suisse only came to own first Boston in the first place because it bailed it out following the collapse of the junk bond market in 1991.
Separately, if you're a woman on Wall Street and you feel you've been poorly treated, you might want to call Wigdor, an employment law firm that's been behind some of the major wins for female bankers with grievances.
Wigdor's latest success concerns Erin McKenna, a vice president in emerging market sales at Santander who was fired when she was three and a half months pregnant. The Financial Times reports that during two high risk pregnancies between 2019 and 2020, McKenna wanted to work from home. Although this was initially permitted, she said she was asked to return to the office and then fired while working from home during the second pregnancy. Her bonus was also cut, twice.
McKenna sued Santander for sex discrimination. The bank (which was last month revealed to be investigating a strip club outing by senior employees in February) agreed to pay $900k to cover the case without accepting liability.
In 2018, Wigdor worked with Shabari Nayak, a former-vice president, who also claimed she'd had bonuses cut and that her career had been derailed during pregnancy. Nayak was paid an undisclosed amount.
Credit Suisse is feeling all bullish about the Middle East: "We have been in the Middle East for nearly 60 years and it will be one of the strongest growth regions over the next 10 years. It is a region we have focused on and we want to grow in — especially as we have strong partners in the region.” (Financial Times)
Morgan Stanley looked for a new office in London and couldn't find one, so it's staying where it is in Canary Wharf. (Bloomberg)
Kelly Brennan, head of institutional equities for Citadel Securities, says trading is becoming less of a boys' club: “Who you choose to trade with is increasingly driven by pure performance metrics, which continues to level the playing field." (Traders Magazine)
Citadel has taken some additional office space in Greenwich as hedge fund employees don't want to commute into the City. Verition Fund Management is also looking for more space in Greenwich. So is Blue Owl Capital. (Bloomberg)
Multi-strategy hedge funds are the new funds of funds. They have $890bn under management and are bigger than standalone global macro funds and approaching the size of the class equity hedge fund industry. (Financial Times)
52-year-old Marc Nachmann is one of Goldman's most trusted fixers and is known as a demanding behind-the-scenes operations manager who takes a tough approach to costs. He's David Solomon's guy. "He’s a cost-cutter. That is what he does.” And now he manages the new asset management and wealth division. (Financial Times)
London’s share of global currency trading dropped to 38% from 43% in 2019. The US went from 17% to 19%. (Bloomberg)
Citi's Jane Fraser has COVID. (Yahoo)
Alexandria Taylor, a Tom Montag protege who was head of HR for BofA's markets business, has left. (Business Insider)
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