Morning Coffee: It's going to be a savage summer at Credit Suisse. Citi is eliminating its alpha males
The news is not exactly unexpected, but it’s still a shock. UBS has announced that it plans to get rid of at least half of the Credit Suisse workforce. The only crumb of comfort is that this figure appears to be calculated on the basis of the 45,000 employees that CS had at the time of the merger, so it includes the roughly 10% of CS bankers who have already left.
The cuts are going to come in three waves, starting this summer. The first is scheduled for the end of July, then another one in September and a final mopping-up exercise in October. Nearly all roles in London and New York are at risk, front-, back- or mid-office. The only people who are likely to be able to enjoy the summer break in peace are private bankers, particularly in Asia, most of whom UBS is attempting to retain.
It seems that the all of bankers who rushed for the exit earlier in the year may have inadvertently made things worse for their colleagues who stayed behind. Normally, banks try to be a little bit careful after an acquisition, to avoid damaging the franchise. But in the case of Credit Suisse, the damage was already done. According to people close to the decision, UBS had originally planned to take the top 20% of advisory bankers in each sector, but quickly found out that by the time the deal was completed, many of the people they had wanted to retain were already gone.
In fact, the only safe jobs outside of wealth management are, slightly ironically, in the bits of business that UBS doesn’t want. If your job involves risk-managing complicated structured products with a long run-off period, then you’re likely to be safe for as long as it takes to run down your risks, which could be quite a while.
So it’s going to be a pretty miserable summer at CS. And UBS bankers aren’t necessarily going to be given much of a chance to enjoy their schadenfreude either. Insiders talking to Bloomberg suggest that the ultimate aim is to reduce headcount by a total of 35,000. Even allowing for quite a generous value of “at least half”, that would imply cuts at UBS close to five figures; the sort of redundancy program that would usually be regarded as quite severe if it took place as a standalone.
In these conditions, people react in one of two ways. They either get aggressive and political, struggling to get ahead of their colleagues for the last seats in the lifeboat. Or they develop a kind of camaraderie and gallows humour, supporting each other as they face the inevitable. Credit Suisse bankers might do best to take the second approach. Not only is it better for the psyche, this is a people business and what goes around comes around. Both enemies and friends made over the next few months will last a long time. And the alumni network of failed banks can be surprisingly strong; think how many top positions today are formed of teams that first met each other at DLJ or Bear Stearns.
Elsewhere, John Heppolette, Citi’s head of markets in North America claims that he “hasn’t seen a phone slammed in years”. This is partly, as he admits, because only boomers use phones and all the real action is taking place in Bloomberg chatrooms. But he also seems to suggest that it’s part of an intentional policy of dialing down the testosterone, as investment banks have gradually realised that there’s no real need to be physically imposing when the trading is electronic, and that the reputation of trading floors as loud and nasty places was making it difficult to recruit talent that didn’t match the stereotype. As Heppolette says, “it’s a competitive energy that then can become off-putting or can get in the way and make us less effective as a team”.
Citi is hoping to benefit from the new trading floor culture by recruiting diverse candidates – introvert personalities as well as extroverts, and people who would never have seen themselves in the environment protrayed in films like “Wall Street”. One can only hope that, since the banks are also telling everyone that they need to come back to the office so that the young recruits can pick up skills and culture, that they won’t also learn a lot of bad habits and worse language.
Meanwhile ...
He’s a former classmate of Tidjane Thiam, his staff nickname him “J-Lo” and he’s potentially got over $8bn to spend. A profile of Jean-Laurent Bonnafe, CEO of BNP Paribas and potentially the “last man standing” (or indeed, “employer of last resort”) in European investment banking. (Bloomberg)
Another event in the category of “things that we knew were going to happen, but which are nonetheless disconcerting when they do” – Goldman Sachs’ latest round of redundancies is concentrated on senior ranks, and it’s now going to be losing 25 MDs in the EMEA region. This apparently includes some voluntary departures to new jobs. (Financial News)
A deep dive on Tom Montag and David Solomon, suggesting that they were never really all that close when Montag worked at Goldman Sachs, not least because he was in Japan for most of the time they overlapped. (Semafor)
Silicon Valley executives are taking psychedelic drugs in the workplace more and more. Does this mean that tech coverage bankers will have to go along with the clients, and if so will the deals they suggest get better or worse? (WSJ)
A profile of Chris Brown, who clearly doesn’t mind doing things their own way; as well as having come out as trans/nonbinary they manage a large and successful hedge fund out of Ohio. (Institutional Investor)
“We’re looking at changing something from a 10-day process to a two-to-three month process”. The changes to US antitrust rules are great news for lawyers, who can bill every single hour, but a horrible prospect for junior bankers, who will have to “pls chase” as the deals stretch out forever. (Bloomberg)
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