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Morning Coffee: Battle-worn bank CEO calls upon colleagues to be kind. The office where JPMorgan millionaires are multiplying

It’s not as classic a stock market indicator as magazine covers or hemlines, but the tone of the monthly Jefferies Leadership Letter is often a good insight into the state of sentiment for the industry.  And the February edition, “People and Purpose” is unusually … raw? Emotional?  It’s not the first time that Rich Handler and Brian Friedman have emphasised the human dimension, talked frankly about mental health or called for more empathy (May of 2022 being an example).  But the latest letter seems to go quite far beyond “it’s ok to not be ok” clichés, and well into admitting that for a significant proportion of bankers, everything really isn’t ok:

“We know from first-hand experience and caring that many people at Jefferies are dealing with, among other travails, things such as: personal mental and physical health issues; grief for siblings, friends, parents or spouses that are very ill or who have recently passed away; painful separations or divorces that are affecting them and their families; managing workload and expectations (real and self-imposed); layoff worries; and career development uncertainties. […]. If nothing else comes from this note, we hope that everyone gets a little solace and comfort seeing that nobody is alone with any of these burdens.”

Reflecting on this reality, the top two announce that they have changed their perspective – from now on Rich and Brian “will NOT be prioritizing” things like “How we recruit new talent” and “Whether new clients or partners will join us”.  Although this might look like a soft announcement that the hiring spree is over, that doesn’t seem to be quite the intended message – “These are all ingrained in our DNA and they will never escape”.  It’s just that growth and financial targets at Jefferies are now less important than being “The Wall Street Firm that is HUMAN” and “the firm that stands for respect and giving back to society”.

The idea is that Handler and Friedman want everyone at Jefferies to concentrate on mentoring, sharing relationships and caring about each other as human beings, in the belief that if they do this, the money will follow.  This isn’t exactly new; similar themes have been in past letters, and the authors portray them as the hard-earned lessons of experience.  In fact, the first half of the letter is more or less a compendium of all the disasters that have ever beset Jefferies’ leadership team over the last thirty years, ever since “One of us [it was Rich] had to spend months in a temporary job working on the liquidation of Drexel Burnham during the day, and manually copying the countless holders lists of almost all the high yield bonds ever issued at night” in order to launch the bond trading business.

Banking is a cynical industry, and lots of people may regard these new priorities as cheap talk.  But there might be an empirical test in the near future.  If these statements of priorities mean anything, they surely have to be inconsistent with the common investment banking strategy of using redundancies to manage the business cycle.  Which would mean that Jefferies won’t respond to weakening revenues with mass layoffs.  If it does, then another proverb will have been proved – that a principle isn’t a principle until it’s cost you some money. 

Elsewhere, a bit more than two years ago, with the stroke of a pen JP Morgan became the sixth biggest bank in Germany, transferring $230bn of assets as it restructured its trading businesses post-Brexit.  At the time, it wasn’t wholly clear whether this was a book-keeping ruse or whether jobs and bonuses would follow the assets.

It’s becoming a bit clearer.  The number of people disclosed as earning more than €1,000,000 at JPM in Frankfurt has risen from nine before the asset move to 85 in the most recent report.  (Before Brexit, the number was zero). 

The increase appears to be only partly driven by transfers of high earners into the city, as well – its also the case that as new products and markets open up, it is increasingly making more sense from a business and regulatory point of view to locate them in the euro area rather than London.  If anything that might be considered worse news for UK bankers – the big job moves have all finished, but a process of gradual irrelevance could go on forever.

Meanwhile …

In a city where the financial services industry was literally invented in coffee shops, it’s perhaps a bit naïve to think that a quick catch-up coffee with a banker can ever be “just a coffee”.  In a current court case about confidential leaks, a former PwC partner has testified that he was “taken by surprise” when the hot drinks and small biscuits came with a side order of aggressive questioning about a live deal. (Financial News)

Fintech employees – particularly if they’re among the 2000 being laid off by PayPal – might be comforted to hear that Elon Musk’s Twitter is making regulatory filings to set up a payments business (Business Insider)

Six out of ten staff at the FCA say that they’re still underpaid, and half of them are considering quitting according to a poll carried out by their union; there are somewhat fewer alternative jobs for them to move to. (Financial News)

A Porsche dealer in China might have set the hearts of first year associates racing when they mistakenly listed a high-end sports car for the equivalent of $18,000.  (Bloomberg)

Doug Villone is returning to the mothership – he spent more than a decade at Barclays, then left to join Goldman Sachs as an MD and head of operations for Marcus, and now he’s going back to Barclays to be head of US cards and partnerships. (Business Insider)

Text mining software demonstrates that the lyrics of K-Pop songs have been getting brighter and more optimistic over the last 30 years while US and UK pop songs have done the opposite.  The authors suggest this reflects society-wide trends in sentiment – it might be interesting to see it applied to CEO letters. (BPS Digest)

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Photo by Anastasiia Krutota on Unsplash

AUTHORDaniel Davies Insider Comment

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