Morning Coffee: Ex-JPMorgan banker’s fee generation from fruitless meeting. Morgan Stanley man takes the worst tech job at Citi

As an old M&A advisor once said, nothing in investment banking is transactional.  Even the transactions aren’t transactional.  Top bankers work by establishing relationships, becoming a trusted advisor, developing a partnership and other euphemisms for “providing lots of valuable work and entertainment for free”.  And then one day, maybe years down the line, a big deal gets done and your bank is “on the ticket” for a share of the fees, which are themselves a single digit percentage of a very large amount of money.

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Because of this slightly bizarre way of working, every investment banker has tales of woe. Clients who accepted the service for years, took the tickets to Madison Square Gardens or the Chelsea Flower Show, invited pitches and even discussed the deal itself in detail.  And then disappeared like frost off a martini glass when it was time to pay up.  Well, finally someone has stood up to the industry.

According to the very interesting legal summary of the dispute between Ian Hannam (now running his own boutique called H&P Partners, but previously the “King of Mining” at JPMorgan’s London office) things aren’t quite as simple as the Hollywood proverb that “a verbal agreement isn’t worth the paper it’s written on”. 

Hannam seems to have been quite useful to his friends at Randgold in generating initial discussions with Barrick that later led to their merger. There was a meeting between Hannam and the client, from which the mining king departed in the belief that he would be due a base fee of $10m, with various additional success payments that could have taken it up to $18m.

But there was no record of that meeting. The client disagreed that they had done anything which might be reasonably thought of as offering a mandate, and the court found that when there’s a dispute over what was said, the absence of any “electronic footprint” means there probably wasn’t an agreement.

However! That doesn’t mean that anything goes.  The court also ruled that having accepted Hannam’s valuable advice and encouraged him to give more, the client had been “unjustly enriched”.  And that to reflect this, they needed to pay back $2m.

So, it seems that investment bankers’ freebies aren’t purely speculative marketing, and they can create an obligation! Group chats all around London have been buzzing about this – the consensus view of bankers is that it might make clients much more reluctant to take meetings.  The court did note this potential “chilling effect”, but pointed out that it would be easy to avoid it with a little common sense.  If clients don’t want to pay for advisory services, they need to say so. If bankers want to have cosy chats, they should do them in a way that creates a record.

Meanwhile, Ian Hannam, who probably doesn’t need another $2m (much of which may have gone on lawyers’ fees anyway) has established a point of principle.  And presumably, crossed a few names off his invite list for the Chelsea Flower Show this year.

Elsewhere, Dipendra Malhotra has left Morgan Stanley to become “Head of Wealth Technology” in Andy Sieg’s division at Citi.  He’s going to be responsible for “spearheading the modernisation” of tech in Citi’s wealth management business, according to the internal memo. 

It’s not completely clear what sense we should understand “modernisation” to have, in context.  At Morgan Stanley, Malhotra was responsible for launching an “AI Assistant” which some advisors considered to be better than the real thing, along with a variety of useful analytic tools. 

Citi’s wealth management division is in dire need of “modernisation.” It operates on archaic systems full of manual cut-and-paste operations which regularly drive Andy Seig up the wall by generating misdirected fat-finger payments.  Dipendra Malhotra is reporting to the CIO rather than the COO, which suggests that he’s going to be involved in helping catch up on cutting edge technology, rather than fighting fires with things that don’t work.  But it’s hard to introduce innovations when you’re on a burning platform.  He’s going to be earning his money.

Meanwhile …

The unwind of the “Trump trade” has not been good for multi-strat hedge funds; the combination of their risk management discipline and some very crowded trades has generated nasty losses in a number of pods.  Ken Griffin is undaunted, and has apparently sent an email round saying “let’s play offense”, although not necessarily in the same direction. (Bloomberg)

Because of the presence of Robert Rubin and Blair Effron (who was one of Kamala Harris’ biggest donors), Centerview Partners is often thought of as a Democratic Party bank. But they’ve now hired Reince Priebus, who was Donald Trump’s chief of staff in his first term, to hedge a few bets. (Semafor)

The Hong Kong market is up 21% for the year so far, as people reassess the potential of China as an AI story after the launch of DeepSeek, and also reassess their perceptions of political risk.  With commendable understatement, one local broker says “We have been waiting for this moment for many years”. (Bloomberg)

If you like buzzword-driven futurism, here’s a guide to the investment bank of the future. Apparently it’s “an ecosystem-integrated model where being able to monetise insights from data sources is the key differentiator.” (Deloitte)

BBVA is following in the footsteps of Santander, with a plan to double the revenue of its investment banking business in the next five years.  This is going to mean significant hiring, particularly in Latin America. (Bloomberg)

If you see anyone walking around acting as if the UK has destroyed wokeness and gone MAGA today, remind them that despite the headlines, it is a diversity and inclusion reporting standard that has been scrapped by regulators, and the actual rules remain today as they were yesterday. (FT)

Jes Staley, possibly having temporarily forgotten what happens when you bring a court case, said that “I think there’s an invasion of my family here and I resent it”, in response to being shown a cache of emails where he discusses his daughter’s university application with Jeffery Epstein. (FT)

Jes Staley had sex with a woman at Epstein's apartment. 'Asked about his visit to the apartment, Staley said he had only been there once. He said he got to know the woman while waiting for Epstein, who was often late for their meetings.' (Bloomberg) 

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