Morning Coffee: The most brutal banking bonus round since 2008. Goldman Sachs alumnus outperforms David Solomon
How will this year's bonus round be in investment banks? Not good. “It will be brutal — this is the worst I’ve seen since 2008-09,” one senior banker at a US bank that's rolled out three rounds of cuts this year (Goldman Sachs?) informed Financial News. "Your job is your bonus," he added, sternly.
Second guessing bonuses is a popular activity in the fourth quarter, but the guessing is increasingly unnecessary. We are now on the declivity to bonus announcements and people are already having their expectations managed. This is the time of year when you are told that your bonus is likely to be bad, and when - if you follow the advice of Matthias Schwarz, Bank of America's ex-head of credit trading, you should make it very clear that if you're not paid well for your services, you are likely to take them elsewhere.
The senior banker who spoke to Financial News was referring to bonuses in M&A and equity and debt capital markets, where Johnson Associates thinks bonus pools will be down 25% and 10% respectively on last year. In fixed income trading, things could be better - particularly for credit traders. But not if fixed income's already insipid bonus pool is redirected to help keep key investment bankers happy.
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This year's bonus wrangling is likely to be particularly intense at Goldman Sachs, where CFO Denis Coleman has said good people need to be paid because everyone still wants to hire them. Spending on compensation at Goldman is up, even though headcount is down. Goldman's debt capital markets bankers, whose revenues are up 35% this year, will likely lay claim to the most generous bonuses, but others will fight their corners. Last year, Goldman only made a small bonus provision for its traders, until heads of that division objected, and the allocation was remedied.
Schwarz says you should really have begun negotiating your 2023 bonus at the end of the summer. But it's not too late. If you're told your bonus is likely to be down, he says you should present some hard facts about "your performance, how valuable you are, how replaceable you are, and how much you are paid compared to peers.” You need to make it clear that you like working there, but could move if you want - and will move if you're woefully underpaid. Although if everyone is underpaid this year, the efficacy of that strategy might be less than usual.
Separately, while David Solomon limps along at Goldman Sachs and relinquishes his DJ side-passion due to the pressure of the job, his contemporary, Alan Waxman, is thriving.
Waxman not only looks like he'd be more at home at a beach party, but is having a fine time as the founder and chief executive of Sixth Street Partners. Having once worked for Goldman himself, Waxman has just purchased Greensky Partners from Goldman for c$500m, just 18 months after Goldman bought it for $1.2bn. Waxman is an accomplished investor, says the Financial Times; he will almost certainly get the better of Solomon in the Greensky deal. Goldman has taken hundreds of millions of writedowns in relation to Greensky. Hypothetically, those writedowns won't affect bonuses, but they are affecting returns and the Goldman share price. Sixth Street is a partnership, so Waxman doesn't have any shareholders to worry about. This might be why he looks so youthful.
Meanwhile....
Ken Griffin paid for employees from six Asia Pacific offices of Citadel and Citadel Securities to fly to Disney in Tokyo for three days, while also treating them to performances by Maroon 5 and Calvin Harris. (Bloomberg)
A lot of people leave their jobs after being promoted. This is because they waited a long time for a promotion and then got an outside offer. (Bloomberg)
Michael Hui, who led Goldman's private equity business in China, has gone to Bain Capital. (Bloomberg)
Wells Fargo hired telecoms banker David Kase from Barclays. (Bloomberg)
Centerview hired Brendan MacBride from Morgan Stanley for its debt advisory arm. (Bloomberg)
Male wellbeing networks are becoming a thing. KPMG might get one. (Financial News)
Women are underrepresented in big law. At Wall Street law firm Wachtell, Lipton, Rosen & Katz, where partners took home more than $7mn on average in 2022 , six women held 13 lead roles on deals in the time period examined. In contrast, 40 men held 299 roles. (Financial Times)
A company in Sheffield has a slide that goes down three floors. Banks could try it. “When we were designing the building, we wanted something that physically symbolized the entrepreneurial journey and its ups and downs. It is a real icebreaker for visiting clients.” (WSJ)
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