If you work in M&A at a big bank and are feeling vulnerable, you have probably considered joining a boutique. Unfortunately, you will be vulnerable there too.
Results are today for both Lazard and for Evercore. Evercore's are better than Lazard's, but both offer a cautionary perspective for anyone thinking that a boutique is a pleasant refuge from the storm.
At Lazard, profits were down nearly 36% year-on-year in the first nine months of 2012. Lazard is responding to this state of affairs by cutting $125m from its cost base. It says that this will be achieved by, "streamlining corporate structure and consolidating support functions; realigning the firm’s investments into areas with potential for the greatest long-term return; and creating greater flexibility to retain and attract the best people and invest in new growth areas."
'Implementation expenses' of $125m are expected to be incurred at Lazard in the 4th quarter. This appears to be euphemism for the fact that people will very soon be dispensed with and awarded redundancy packages.
By comparison, Evercore has announced neither redundancies nor cost cutting. Profits at its investment banking business are down a mere 10% so far this year. Notably, however, Evercore's investment banking business is run on a slim margin - just 20%, with compensation costs accounting for 60% of revenues. At Lazard, compensation eats up 63% of revenues. The message is clear: if you work at a boutique and revenues fall, there's not much fat to be cut before your job is eliminated.
Separately, Creditsights has an interesting table comparing the performance of US banks' investment banking businesses in the third quarter. Standout successes include: Goldman Sachs in ECM and DCM and Bank of America in fixed income sales and trading. Unmitigated disasters include: Bank of America in M&A and Morgan Stanley in equities. Upgrading may yet ensue.
Credit Suisse's CFO said business trends in the first weeks of the fourth quarter were similar to the third. (Reuters)
Lloyd Blankfein says he's heard that it would take an hour and a half to read Greg Smith’s book and that he’s heard too that it’s not worth it. Also, that Goldman is good at self-flagellation. (WSJ)
Bloomberg takes down Greg Smith on behalf of Goldman Sachs. (Bloomberg)
Hong Kong hedge funders defy their mothers, take to the boxing ring. (Bloomberg)
Vince Cable, business secretary, says the City is “a massive cesspit.” (Independent)
Man leaves Credit Suisse, sets up hedge fund, achieves 60% returns. (Reuters)
Even moderate drinking reduces the structural integrity of the adult brain. (Science Daily)