Morning Coffee: Deutsche Bank juniors shocked to discover they have no jobs. Citadel's big European expansion
It's been a while since Deutsche Bank made any big cuts in the front office, but it's not averse to a little global trimming here and there. Yesterday's dismissal of what the New York Post said were 20 junior bankers and a handful of senior employees, with the senior employees seemingly including Mason Parker, an MD with decades of experience in leveraged finance, falls into the trimming category. But it's caused some consternation all the same.
The juniors who were told they were surplus to requirements were "shocked", says the Post. "There are so many people who have never been through a downturn.”
Bloomberg reported that the cuts extended to "dozens" globally. Deutsche Bank is due to report its third quarter results next week, but presumably they'll be on a par with other banks' tortured performance. Revenues in Goldman Sachs' investment banking division (M&A, ECM and DCM) fell 57% year-on-year in the third quarter; Goldman too has been doing some gentle pruning.
The question, as ever, is whether and when the pruning will become less about secateurs and more about machetes. Unnamed pundits speaking to the New York Post suggest Q1 2022 will be the moment of revaluation. “If we get to the end of February and the economy isn’t as good as we hoped, there will have to be additional actions,” declared an 'inside source.'
Another Post pundit pointed out that it makes sense to layoff junior bankers because there's always another graduating class around the corner. Managing directors, however, take years to ripen. This evidently didn't apply to Mason Parker, whose business area has some issues of its own right now. While juniors are being dismissed, Deutsche Bank's desire for new senior talent across areas like technology, healthcare, industrials and sponsors appears undented. In 2022, it's hired 22 managing directors or directors in origination and advisory globally, including Slavko Andrejevic in London (sponsors), and Robert Lee (tech), Rob Stewart (M&A) and Tej Shah (tech) in the US.
Separately, while Deutsche Bank is gently ingesting new senior staff and ejecting unwanted juniors, Citadel and Citadel Securities have been adding new people at all levels in Europe. The hedge fund and electronic market making firm have doubled their European headcount to 750 people since 2019, says Bloomberg. Most of the new additions are in London, where 700 of the 750 are located. Citadel's Paris, Dublin and Zurich offices are also adding heads.
Meanwhile...
Listening in outside Goldman Sachs. "Hiring people sucks. It’s just how you get scale." (Curbed)
David Solomon said Goldman Sachs is getting back to normal. "Before the pandemic, about 75% of our people were in the office on any given day of the week. Today, it's about 65%, so we're kind of operating close to the way we were." (Business Insider)
The new favourite place for Goldman Sachs alums to work. Byron Trott and Greg Lemkau are forming a new firm from the combination of Byron Trott’s BDT & Co. with MSD Partners LP, the Dell-backed investment firm where Lemkau's been working. (WSJ)
Goldman is bringing its software developers closer to the business. “Now, we want them to answer the ‘why’ questions” that get to the business purpose behind their work...That is a big change.” (WSJ)
Millennium's co-chief investment officer, Bobby Jain, says it's been a great year what with the volatility. "You can get two years worth of trading in one year.” (Bloomberg)
JPMorgan says Taiwan and Brazil are better destinations for investment than the UK. “The UK's problems are not insurmountable. But for the moment, they remain daunting.” (Telegraph)
Jamie Dimon is going to call British chancellor Jeremy Hunt and they will discuss tax. Hunt has indicated that he will raise corporation tax to 25% from April. Banks are already paying an 8% surcharge on their profits. Unless Hunt reduces the surcharge, they will be taxed at 33%, up from 27% now. (Bloomberg)
Nouriel Roubini is not feeling optimistic. “And this is just the beginning of that pain. Wait until its real pain. And then you have a major financial institution that may crack globally, not in the US maybe now, but certainly internationally. There are a couple of firms that are huge and systemic. They can go under. You might have another Lehman effect, then the Fed will have to wimp out. You’ll have a severe recession and you’ll have a financial market shock..." (Bloomberg)
Michael Patchen, the chief risk officer at Genesis, has left after only three months. (Bloomberg)
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