Morning Coffee: The safest jobs in banking might be at CS First Boston. Big tech bosses are having to work like bankers
According to industry legend, the original merger of Credit Suisse with First Boston was somewhat fractious. The degree of animosity between the two sides was allegedly illustrated by a coffee cart on the trading floor which went up and down the desks occupied by First Boston staff, then reached the Credit Suisse area and immediately turned round.
This sounds like an urban myth – people retelling the story can never quite get it straight whether it was a coffee cart, a cake trolley or a shoeshine stand, and it was either in New York or London, or both. Most of the people who might have been able to confirm or refute it are long since retired (although apparently 10 of the 11 members of the CSFB management committee started their careers at either First Boston or DLJ). But looking forward, it’s quite possible that cakes might once more be sliced rather differently on the opposite sides of an imaginary line.
On the Credit Suisse side, things are still in the dark hours before dawn – some junior and mid-level bankers are apparently getting their bonuses in three instalments to try to keep them around, while some senior MDs and rainmakers have apparently had their compensation meetings postponed. Although the share price is off its lows, there’s not much respite from investor pressure, or from the continued risk of further staff cuts.
CSFB, on the other hand, is being relaunched as a “super boutique”, with documents accompanying its fund-raising projecting a sharp recovery in revenues and a potential IPO in 2024 or 2025. Although obviously, those documents will have some industrial-strength disclaimers about forward-looking statements, it very much seems that the new bank has a business plan based on coming out swinging to compete with the Evercore and Lazard tier of advisory bankers – it wouldn’t really be consistent with that aim to be having a big reduction-in-force six months after the spin-off.
Not only that, but CSFB could potentially be getting Apollo as one of its anchor shareholders (the private equity group is already buying the CS securitized products business). As well as a deep-pocketed backer, Apollo is one of the biggest financial sponsors clients in the Street. It has fiduciary duties, of course, which mean it’s unlikely to hand out mandates on any criteria other than merit, but if CSFB becomes the “home team” for Apollo deals, bankers are likely to at least find that their calls are taken.
It really does underline the role of luck in creating a career. For the associate classes of the last four or five years, the current state of things appears to be that if the Sorting Hat of the internship process put you into M&A advisory or leveraged finance, you’re off to a potentially exciting new startup; if you got sent to sales and trading or capital markets, you’re looking out to the rebuilding of a grand old franchise. It feels like the start of a spin-off TV drama.
Elsewhere, there are some industries where managers are expected to manage rather than doing the work themselves, and some like investment banking, where it’s expected that even Global Co-Heads will be doing deals themselves most of the time. Now it appears that at Facebook parent Meta Platfoms Inc a large number of middle managers are being asked to become “individual contributors”, in the sense of actually writing computer code.
This is taking place in the context of an overall “flattening” of the management structure, and it looks as if some of the moves to individual contribution may be de facto demotions of the managers of small or duplicated teams. That’s not to say that they will all be unwelcome, though – the employment security is always a lot better when you can point to specific pieces of output that you produce than when your contribution is more organizational and abstract. And in general, people go into a career because they like doing the interesting things, not because they have a deep love of administration. Many of the most successful bankers, after all, are visibly nostalgic for the days before they allowed management to enter into their lives.
Meanwhile …
"And I was like, OK, great ... I guess it's me. I guess it's happening right now." Young people caught in the latest round of banking layoffs explain what it felt like. Even though Emma Alexander had studied sociology and only applied to Goldman because it felt like the thing to do, she had grown to like the culture and is hoping to get back into the game. (NPR)
Former Goldman banker Harvey Schwartz has a series of challenges in his new job as CEO of Carlyle – get fund raising back to strong growth, sort out the share price and make sure that the founders, who still own a third of the company, feel like their advice is being respected. (FT)
Jim Simons, the founder of Renaissance Capital, has another fund called Euclidean Capital which has positions in a number of small biotech companies. It looks as if they are the result of previous private equity investments, although it might be more fun to believe that the smartest man on Wall Street is as addicted to penny stock punting as any other rich uncle. (Institutional Investor)
“The sell side is not where a superstar portfolio manager aspires to be. We would question why anyone who wants to be in a risk-taking seat is still there.” Headhunter Ilana Weinstein is talking in the context of recruitment of commodity index traders, but this somewhat brutal assessment is probably valid for a number of other markets too. (Bloomberg)
Hiring freezes, layoffs and failure to offer permanent jobs to the intern class – the gloss seems to have very much come off the Bigtech industry as a competitor to Wall Street for graduates of elite universities. (WIRED)
Once a surprisingly hot market for hiring, mid-market US deals are feeling the same winter as the bulge bracket, with Truist Financial laying off five investment bankers after a 37% fall in revenues. (Bloomberg)
A real sign that the pandemic is definitely over – having tripled its headcount in three years, Zoom is now laying off 15% of its workforce. (WSJ)
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