Sometimes it takes a fresh pair of eyes to discern the truth. Alison Rose, the new chief executive at the UK's Royal Bank of Scotland (still government-owned) may be just that. Despite years of cost-cutting under previous CEO Ross McEwan, Rose says RBS hasn't gone far enough. Entirely new cuts are needed, and they will be of a different order to the old ones.
"Tough choices" are required, Rose told RBS employees late last week. "Continuing to reduce the bad costs across the bank, safely and at pace, will be critical." The reason? "So we can invest further in our technology.”
If this sounds familiar, it's because the same mantra is being chanted everywhere right now. If there's a bank that isn't slashing costs to invest in technology, it's an outlier. Cutting to spend on technology has been a thing for several years, but 2020 looks like the year it gets real lift.
While RBS is priming its people for what the Financial Times describes as, 'a fresh strategy and cost-cutting plan in the new year,' other banks are doing the same and jettisoning ballast as they go. HSBC, Goldman Sachs and UBS are all promising new strategies for the new decade. UBS is already parting company with some of its longest-serving and most expensive staff; global head of equity capital markets Javier Martinez-Piqueras left last week, as did Philippe Pillonel, the chair of investment banking.
At Deutsche Bank, which pioneered the trend for a major reorganization and cost-cutting under a new CEO, this year's cuts are likely to continue. Last week, the German bank appointed a new head of 'transformation' (Fabrizio Campelli from its wealth management division). Campelli is tasked with coordinating the implementation of the new strategy (cut costs/invest in technology) in 2020, and of driving it forward with, "a sharpened focus.”
If there's any good news in new banks' enthusiasm for extracting costs and headcount, it's that laying people off is expensive and the preference therefore seems to be for easing people out voluntarily. As we reported last week, what was Deutsche's investment bank (before it was split into an investment bank, a corporate bank, and a capital release unit), now has nearly 4,000 fewer staff than this time last year; the investment bank alone has 750 fewer. However, Deutsche CFO James von Moltke said last week that only 500 of those leaving DB's investment bank had done so 'involuntarily', suggesting that the rest took early retirement or simply found jobs elsewhere.
An early retirement plan may be an option for RBS as it looks to cut costs in its underperforming NatWest Markets sales and trading division. The business has a reputation for long-serving, high-performing traders, but only the first part now seems to be true. One RBS shareholder notes that the bank's sales and trading business was 'right-sized' three years ago, but that "structurally lower" revenues mean it might need to be right-sized again. Welcome to 2020.
Separately, there seems to be some schadenfreude at JPMorgan over the fall of WeWork and the associated tarnishing of Noah Wintroub, JPM's San Francisco-based chairman of investment banking, who was tasked with bringing in business from technology companies.
Business Insider suggests Wintroub isn't the most popular person at JPMorgan, where he's managed to irritate colleagues by playing internal politics and making like a Silicon Valley entrepreneur instead of a banker. BI says Wintroub wears rimless glasses and jeans and shirts instead of a suit and tie. He likes to post photos of himself running on social media and to make Twitter shout-outs to his clients. He's a hugger instead of a hand-shaker, and he's ejected fellow senior bankers from their corner offices so that everyone can sit together in a non-hierarchical open plan environment instead.
Now that WeWork isn't going to IPO for $47bn and Jamie Dimon looks a little foolish for befriending Adam Neumann, Wintroub's vibe is losing its lustre. Some of his colleagues appear to be quite pleased about that.
In buying Deutsche Bank's prime brokerage business, BNP Paribas is going for $300bn in hedge fund money. That's a big gamble. (Bloomberg)
Jefferies quietly built itself a team of 80 equities analysts in Europe. (Financial News)
Deutsche Bank is chasing revenues in private placements after hiring David Costa from Goldman Sachs to run the team. (Reuters)
Adam Glover Bailie, a 48 year-old senior trader at ADM Investor Services International, says he was marginalised within the company following a mental health breakdown that got worse after he tried to stem almost $10m of losses after the February market crash last year. (Financial Times)
Ex-Goldman Sachs banker sees deeper meaning in bee hives. “In a way, bees are like an investment bank or an asset-management company, or a human social network group. They are geared toward accomplishing a particular purpose, and there’s incredible discipline and versatility in beehives. If you analyze their social characteristics, there are many aspects that mirror human society and its utilitarian approach.” (Bloomberg)
People who tell you to follow your passion are already rich. They have doggedly pursued a path and have been obsessed with success for a long time. They want to sound inspirational and give you a sound bite, because the truth that success requires sixty- to eighty-hour weeks for several decades doesn’t get applause in graduation speeches. (A wealth of common sense)
Adam Neumann behaved like a psychopath as a boss, encouraging co-workers to stand on top of a 57 storey under-construction skyscraper with no guard rails and to drink communal beer from neglected old bottles. He'd also convince people to smoke marijuana at work. (New York Times)
Does smoking lots of pot make you dumb or do dumb people smoke lots of pot? Mostly, the latter. (Marginal Revolution)
If you want to appear less dominant in a selfie, take a photo from above. (Orca)
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