Why the Year of the Monkey just might save your banking career

February 9, 2016, 12:43 pm

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Welcome to the Year of the Monkey. If you work in Asian banking, especially if your job is linked to the region’s volatile equity markets, you may be hoping that the next 12 months bring you better luck than the previous 12.

In the Year of the Goat, Asian finance staff were butted by banks (Standard Chartered, Barclays, Deutsche Bank, BNP Paribas, CLSA, Nomura, CIMB and Jefferies) culling jobs in their under-performing Asian equities teams.

Will the Monkey be kinder? Especially for equities traders and salespeople? To speculatively answer this question, you could perform a dry analysis of various macro and micro-economic trends, drawing on your deep understanding of cash equities. Alternatively, if you’re a fan of the Zodiac, you could look at how stocks have performed in other Monkey years over history.

Janice Phoeng and Laurens Swinkels of the Erasmus School of Economics have done the latter. In a new research paper, they’ve calculated average US ‘equity factor returns’ (in four categories) for each Zodiac calendar year from 1926 to 2015. And their analysis suggests that markets typically perform well in Monkey years.

As the first chart below shows, in the main ‘market factor’ category (investor return from equities over and above risk-free interest-rate based investments), the Year of the Monkey places fifth out of the 12 Zodiac years – its average return of 9.4% means it beats the Year of the Goat.

The year ahead for stocks may be a particularly buoyant one when measured by the ‘size factor’ (excess returns of stocks with small relative to large market capitalisation) and the ‘value factor’ (excess returns with low relative to high book-to-market ratios). Monkey years rank third in both these categories, as the charts below show.

Measured by the ‘momentum factor’ (excess returns of stocks with high relative to low past one-year returns), the Year of the Monkey doesn’t look so merry:

The report authors, however, do end up cautioning against adopting a purely Zodiac-based investment strategy: “The Year of the Rooster seems to be particularly good for each of the equity factor returns, while the Year of the Ox seems particularly poor. However, when we employ statistical tests, we do not find enough evidence to reject the null hypothesis of equal returns across Zodiac signs. Hence, we conclude that investment strategies based on Zodiac signs are unlikely to generate superior returns.”

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Image credit: namphetch, iStock, Thinkstock

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Morning Coffee: Deutsche and Credit Suisse need to hire exactly the same people, urgently. J.P.M. paid 51 year-old trader $9m

February 9, 2016, 9:03 pm

≫ Next: Why I left my job on a trading floor to work for a technology vendor

≪ Previous: Why the Year of the Monkey just might save your banking career

If daily deterioration in a bank’s share price is a measure of its health, then neither Credit Suisse nor Deutsche Bank are looking very vital. Deutsche’s shares deteriorated another 4% yesterday, taking their decline since the start of January to 40%. Credit Suisse’s shares deteriorated another 8%, meaning they’re down 40% in 2016 too.

Credit Suisse doesn’t face the same concerns as Deutsche Bank over the payment of coupons on its Coco bonds, but the two banks have some other very important things in common. Firstly, they both have new chief executives. Secondly, it’s possible that the boards behind those chief executives aren’t up to the job.

Swiss website finews points out that Credit Suisse’s board includes all sorts of exciting people. – There’s a man who helped designed Google’s driverless car, a Harvard professor, and the CEO of Roche. There’s also a woman who spent 13 years at the European Bank of Reconstruction and Development, and there’s Urs Rohner. a securities lawyer who spent time in the entertainment industry. What there aren’t, are senior bankers with the authority to challenge the CEO, Tidjane Thiam.

It’s a similar story at Deutsche Bank. Reuters reports that aspersions are being cast about the calibre of the German bank’s supervisory board. One “top ten” investor told Reuters the board is lacking, “competence in financials” and that faith in chairman Paul Achleitner is waning. Achleitner himself is a former partner at Goldman Sachs in Germany, but other members of Deutsche’s supervisor board include the CEO of a pharmaceutical company, the chairman of the board of E.ON, and a professor of political science.

The consequences of a weak board are arguably more visible at Credit Suisse where Finews claims that Thiam has, “been granted carte blanche over the bank’s new strategy.” Cryan’s remedy for Deutsche isn’t without its critics either, however: one investor told Reuters that the two years Cryan’s given himself to implement Strategy 2020 are too long and leave no margin for error.

Maybe a stronger board would hold Cryan to task? Maybe a stronger board would also stop Thiam rushing off into Asia and dismantling Credit Suisse’s investment bank? Both banks could benefit from hiring some highly seasoned banking executives with experience of steering organizations through choppy waters. If this is you, get in touch. Shareholders at Credit Suisse and Deutsche might be very thankful.

Separately, the UK Financial Conduct Authority’s judgement on ex-J.P. Morgan CIO trader Achilles Macris (whom it’s just personally fined £800k for “failing to be open and cooperative” during its investigation) puts paid to any notion that banking pay shriveled and died after the financial crisis. In the year from 30 April 2011 to 29 April 2012, the FCA says J.P. Morgan paid Macris £6.2m ($9m)….

Meanwhile:

In which Achilles Macris ignores the fine and focuses on something else entirely. (Mondovision)

In which John Cryan reiterates that Deutsche is hiring in equity research and M&A. (Deutsche Bank)

Maybe it is more appropriate to think of Cocos as a regulator-optimised form of preference share. (Alphaville)

The problem here: “At the root, are some of these [European] banks as well capitalised as the US banks? Probably not. Can they continue to build capital in an environment where there is not a lot of revenue growth, and a lot of expenses have already been taken out of the business?” (Financial Times)

Deutsche Bank’s shares now trade at about 35% of the tangible book value of the bank’s assets, partly because equity investors can’t get a clear handle on what lies ahead. (Bloomberg)

Credit Suisse just moved a managing director in its global credit products business into its strategic resolution unit. (Reuters)

UBS had been planning to hike salaries in the investment bank. It’s decided to postpone the decision to go ahead until Q2. (Bloomberg)

Morgan Stanley executive says the year has begun very badly for traders and that the bank dumped 25% of its FICC front office staff because it, ““sends a message to the market that we’re listening, but also that we’re in it for the long term.” (WSJ)

How to get a top job at Barclays: have a history of working with Jes Staley at JPMorgan. (Business Insider)

Some of the brokers acquitted in the LIBOR were builders before they went to broking. (Bloomberg)

If you don’t sleep 8 hours a night, you’ll confess to things you didn’t do. (BloombergView)

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Photo credit: NOW HIRING by ***Karen is licensed under CC BY 2.0.

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Why I left my job on a trading floor to work for a technology vendor

February 9, 2016, 10:54 pm

≫ Next: ‘What’s up with Deutsche Bank?’, by Goldman Sachs and others

≪ Previous: Morning Coffee: Deutsche and Credit Suisse need to hire exactly the same people, urgently. J.P.M. paid 51 year-old trader $9m

Peter Zeitsch spent 13 years working on the trading floors some of the biggest investment banks in the world before joining Calypso Technology in 2013. He went from a desk-bound job to one that requires “catching planes like most people catch buses” and from working predominantly with middle class men to diverse range of cultures.

“In the first few weeks on the job I flew to our San Francisco office and the first thing I saw were some female colleagues all speaking in the reception area in French,” he says. “To someone used to working with alpha males from similar backgrounds, this was a bit of a culture shock.”

A start-up mentality

Joining a financial technology vendor like Calypso required a period of adjustment, he says, but much of this was a positive experience.

“When you’re in a bank you’re part of a very hierarchical matrix of command and you’re siloed. You speak to your boss, who speaks to their boss who then speaks to someone else you’ve probably never heard of,” he says. “Here it’s a much flatter structure. I have no problem picking up the phone to the CEO to talk about the projects I’m working on. It’s a very start-up mentality.”

For a company with 21 offices worldwide and 800 employees, this seems like a counterintuitive sentiment. The point, says Zeitsch, is that Calypso has to continually adapt to the demands of its clients and the products it creates have to react to the changes in a dynamic financial services environment.

Zeitsch himself was latterly trading counterparty valuation adjustments (CVA) and XVA solutions, which manage banks’ derivatives valuation adjustments, and was drafted into Calypso to help get their CVA trading solution off the ground.

“Five years’ ago, the concept of XVA trading didn’t exist,” he says. “I came in and had to establish if there was a demand for a product and what exactly potential clients needed. We had to move quickly to remain competitive and this happens a lot as regulations change. It’s like a series of small start-ups in a larger institution.”

The changing world of banking

He admits that he was drawn to Calypso because it produced the “Rolls Royce” of structured credit platforms when he was working in banking. But the changing nature of trading in investment banking – particularly the fact that compensation has been heading down – was one of the factors that influenced his decision to switch.

“The perception of banking as being a very high-paying industry no longer reflects the reality. My friends in banking are not earning what they once were, and I’ve come across a Nordic bank with a no bonus policy – this would have been unheard of in the 2000s,” he says. “Calypso offers the potential for a very lucrative role – you’re incentivized well and if you make the numbers your pay is very competitive.”

Zeitsch has a PhD in Mathematics from the University of Sydney and admits that his first choice was to try and enter academia. The proliferation of banks and financial services organizations on campus eventually persuaded him to sign up as a quantitative analyst to Zurich Capital Markets in Australia.

“I realized that capital markets was a fairly brutal game, and as someone who played rugby until the age of 28, this suited my personality,” he says.

Zeitsch’s current role as a product manager involves not only defining the product and tailoring it to clients’ needs, but travelling around the world in order to pitch to potential customers and implement the software for those who have bought it.

For a man who has spent much of his career tied to a desk on a banks’ trading floor, this has been a profound change in working life. Zeitsch is currently based out of Singapore – and will soon move to Calypso’s head office in San Francisco – but has spent much of the past two years hopping on a plane to everywhere from Moscow to Toronto.

“One of the things you learn quite quickly is that no matter where you are in the world, financial services professionals are surprisingly homogenous,” he says. “The great thing about travelling is not the places you go, but the people you meet.”

Zeitsch’s relocation to San Francisco is indicative of Calypso’s attitude to its employees, he says. “We have a team based in Paris working on equity derivatives software, for example, because that’s where the graduates of the French Grands Ecoles wish to be based. Calypso is very accommodating to talent.”

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‘What’s up with Deutsche Bank?’, by Goldman Sachs and others

February 10, 2016, 5:17 am

≫ Next: Neither CFA nor MBA, other qualifications for jobs in banking

≪ Previous: Why I left my job on a trading floor to work for a technology vendor

Is it still safe to join a European investment bank? Sure, Deutsche’s shares are up 14% this morning following the German bank’s promise to contemplate buying-back some of its senior bonds. Sure, yields on CoCos are now falling back. Sure, Credit Suisse CEO Tidjane Thiam has declared the panic overdone. But, several banking analysts still have several lingering doubts.

Analysts at Goldman Sachs issued a note yesterday reiterating their neutrality on Deutsche’s stock. While Deutsche might be able to allay concerns about its ability to pay coupons on its CoCos in 2017 for the moment, Goldman analysts said the bank still faces the same underlying issue: the structural weakness of its business model.

Meanwhile, the banking analysts at Bernstein Research have issued a broader note casting aspersions on the whole European investment banking sector, along with various US broker dealers.

This is what you need to know.

1. Goldman Sachs says Deutsche’s problems are about more than restructuring and litigation charges

Deutsche Bank €6.8bn net loss for 2015 was mostly down to (yet more) restructuring and litigation charges. For Deutsche watchers, the loss shouldn’t have come as a surprise: CEO John Cryan flagged the likely pain when he announced his Strategy 2020 plan in October. 2016 and 2017 are both likely to bad for Deutsche, said Cryan. – Things will only take a turn for the better in 2018.

This is all well and good, if investors are prepared to be patient. – Events this week suggest they may not be.

Moreover, analysts at Goldman Sachs say Deutsche’s problems go deeper than its litigation and restructuring charges. In a note issued in September (to which they referred yesterday), they pointed out that even when these charges are normalized Deutsche has a problem with returns. Witness the chart below. When Goldman’s analysts adjusted the long-term (15-year) time series of Deutsche’s return on target equity (ROTE) by applying normalized levels of litigation and restructuring and re-calibrated the tangible book value (TBV) to its level in the first half of 2015 (as well as the expected steady-state level in 2018), the bank ended up with a return on equity of just 4% over the past 15 years.

In other words, whatever’s going at Deutsche is not transitory.

Source: Goldman Sachs

2. Deutsche needs to seriously restructure its business – and to get a grip on headcount

In yesterday’s note, Goldman’s analysts said Deutsche’s problems will continue until it restructures its business along the lines they suggested in September. And in September, they said Deutsche needs to give up on chasing revenues and to seriously cut costs. Most importantly, they said Deutsche needs to get a proper grip on headcount which keeps increasing despite promises to cut it back.

“An absolute cost, and headcount, target is required [at Deutsche],” said Goldman’s analysts in September, pointing to the charts below – which show headcount increasing everywhere, except asset and wealth management in the period between 2012 and mid-2015. Since then, headcount at Deutsche’s investment bank has – needless to say, increased even further – it rose by 9% last year as 2,700 staff were added in support roles.

Net, John Cryan wants to cut around 7,000 staff from Deutsche bank between now and 2020. However, Deutsche’s record on restraining headcount is not good. – If investors are to have confidence in Cryan’s plan some serious cuts will need to start appearing soon.

Source: Goldman Sachs

3. Deutsche Bank is badly under-capitalized, and it’s not the only one

In a separate note out today, analysts at Bernstein Research say European investment banks and the US broker dealer sector in general are still under-capitalized despite six years spent trying to remedy the situation.

When deferred tax assets (DTAs) are excluded, Bernstein’s analysts point out that Deutsche’s tangible equity is a mere 2.7% of its tangible assets. The only bank with a lower ratio than this is Credit Agricole (ACA), with 2.3%, although Credit Suisse isn’t much better with 3.0%. Standard Chartered looks healthy, with 7.3% but is being punished by the markets as an emerging markets bank with commodities exposure, says Bernstein. Meanwhile, the under-capitalized French banks (Credit Agricole, SocGen – GLE, and BNP Paribas) are seemingly being protected by implicit regulatory backing by the French government.

Source: Bernstein Research

4. If credit markets are right, investment banking revenues will fall by around 30% this year

Bernstein’s analysts say this week’s moves in the price of banks’ credit default swaps (CDS) – the price of insuring against default on bond coupon or principal payments – bode badly for banks’ revenues.

Last time spreads rose like this was during the global financial crisis (GFC), points out Bernstein. And then, investment banking revenues went on to collapse by 30%-40%.

“If credit markets are right about the state of the world …and they generally are,” Bernstein’s analysts say investment banking revenues could fall another 30% in 2016. A “vicious circle” is at play as “higher spreads lead to more risk off leads to earnings drags leads to even higher spreads,” they claim.

Moreover, as spreads blow-out, Bernstein says European banks will find it even harder to increase their capital ratios by deleveraging and dumping risk weighted assets. – Suddenly, capital becomes a problem again, which is not good given European banks are so under-capitalized to begin with.

Source: Bernstein Research and Bloomberg

5. Aaaaand, European investment banks aren’t in much of a position to cut costs

Lastly, Bernstein’s analysts say investment banking in Europe has, “basically become a fixed cost business in Europe (given regulation around compensation) with the most volatile income stream.”

Take the example of Barclays in the chart below: fixed compensation now accounts for the bulk of pay in the investment bank and is expected to rise rather than fall between now and 2018.

If revenues across investment banks really do drop by 30% in 2016, the implication is that European banks will be faced with one real option: harsh cuts to headcount which could damage their franchises irrevocably for the future. Looks like 2016 could be ‘fun.’

Source: Bernstein Research

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Neither CFA nor MBA, other qualifications for jobs in banking

February 10, 2016, 7:47 am

≫ Next: Morning Coffee: Top Morgan Stanley banker displays folly of the ‘internal move.’ John Cryan’s odd comment

≪ Previous: ‘What’s up with Deutsche Bank?’, by Goldman Sachs and others

If you’re thinking of breaking into banking, you’ve probably thought about studying for a CFA qualification. You’ve probably also contemplated an MBA. Both are popular among financial services professionals looking to get ahead. Both are also broad-ranging qualifications which apply across a range of financial services jobs. And in the case of MBAs at least, some banks have special ‘associate entry programs’ for hiring MBAs from top business schools.

However, there are plenty of other financial services-relevant qualifications out there. Many are more specific than the CFA or the MBA and focus on particular areas of the finance industry. Most aren’t mandatory – in the UK, the Financial Conduct Authority (FCA) scrapped obligatory qualifications for investment bankers back in 2007.

These alternative qualifications aren’t guaranteed to get you a job – but then neither is the CFA Charter or an MBA? Best of all, they’re cheap – especially compared to the huge tuition fees at top business schools.

If you want to work in banking, but aren’t fixated on the front office and are prepared to look beyond the standard acronyms, these are the qualifications you should look out for:

Qualifications for banking compliance jobs

1. The CISI Diploma in Investment Compliance

Run by: The Chartered Institute for Securities and Investment

What they say: ‘The Diploma in Investment Compliance is a global qualification that offers a clear career pathway for compliance specialists and practitioners. Achieving this qualification, will provide you with the confidence of possessing a thorough understanding of the financial services regulatory environment both in the UK and internationally.’

Entry requirements: You’ll have to study the ‘Introduction to Securities and Investment Banking First. ‘

Cost: Around £1.7k, including tuition and exam fees.

Study time: You need to pass three exams to achieve the diploma. On average, the CISI says you’ll need to study for around 80 hours for each unit. Passing the diploma typically takes 18 months to two years according to BPP Professional Education.

Pass rate: Thought to be 70% for the first two exams. 50% for the third.

What we say: The CISI diploma is best known in the UK market. It might help get you an interview, but it’s very unusual for a job to specify the diploma as a prerequisite.

2. The Advanced Certificate in Compliance

Run by: The International Compliance Association

What they say: ‘The ICA Advanced Certificates in Compliance is suitable for those new to compliance or in a junior role and will help you develop a good understanding of compliance fundamentals.These courses are endorsed by the British Bankers’ Association in the UK.’

Entry requirements: ‘Sound educational background’ and ‘good written English.’

Cost: £1.5k + VAT or local taxes if outside the UK.

Study time: The course lasts for six months and is provided by ‘International Compliance Training’, the ICA’s approved training provider. You’ll be studying at home but will participate in two ‘highly interactive workshops.’

Pass rate: Not provided.

What we say: An entry-level certificate in compliance. Good for people who want to work in money laundering and financial crime. You’ll need work experience to get a job – there are few jobs that specify this qualification as a necessity for compliance hires. UK-centric. Hardly anyone has this qualification on Wall Street or in Hong Kong or Singapore.

Qualifications for sales, trading or structuring jobs

3. The Fixed Income Certificate (formerly the International Fixed Income and Derivatives Program)

Run by: The International Capital Markets Association.

What they say: ‘The gold standard qualification for finance professionals for almost 40 years. The programme places emphasis on developing practical skills for trading, investment and risk management, designed to give a fixed income professional all the knowledge needed to understand pricing, risk and trading opportunities in these markets.’

Entry requirements: There are no specific requirements, but the presumption is that you’ll already be working in banking – either in a front office role, or in a support function. You can take a sample paper here to see if it’s right for you.

Cost: £3k for ICMA members and £3.9k for non-members if you take the classroom-based learning option. £1.5k and £1.95k respectively for the distance learning option

Study time: The classroom based version of the programme is delivered as a one week course across Europe. Distance learning gives candidates flexibility to study in their own time, subject to a six month exam deadline.

Pass rate: Not provided.

What we say: Not mandatory, but IFID is known among fixed income traders and portfolio managers in London. Often used by back office people trying to gain product knowledge and move into the middle office. Again, less common in Asia and the U.S.

4. The CISI Diploma in Capital Markets

Run by: The Chartered Institute for Securities & Investment

What they say: ‘The Diploma in Capital Markets is a leading professional finance qualification for practitioners working in wholesale securities markets….It is ideal for practitioners pursuing careers in treasury and financial controlling functions, private equity analysis, portfolio management, fixed income analysis, fund management, financial consulting, financial risk management, investor relations, internal audit and specialist financial operations.’

Entry requirements: There are no formal entry requirements. But most candidates will have a degree.

Cost: If you’re paying for classroom tuition, it will probably cost you around £5k for the three units. If you’re teaching yourself, it will cost you around £1.8k in study materials and past papers.

Study time: You’re advised to study for 200 hours for each diploma unit (and you need to choose three). The diploma typically takes between 18 months and two years to achieve. You can either choose to study on your own, or can pay for training.

Pass rate: 44% to 80%, depending upon the papers you take.

What we say: Very rarely specified in job descriptions. Popular among back and middle office (including compliance) staff who want to learn more about the products they’re dealing with.

5. The London Business School’s Masters in Finance

Run by: The London Business School

What they say: ‘Ranked number one in the world by the Financial Times for the last five consecutive years, the School’s outstanding global reputation in finance and strong links with financial institutions, recruiters and practitioners means there is no better place for you to study finance.’

Entry requirements: You’ll need at least two years’ experience in a financial services job to be eligible for the course. Most people have 3-6 years’ experience and part time students have 3-12 years’ experience.

Cost: £42k.

Study time:10 months or 16 months (if you want to be able to complete an internship) full time; 22 months at weekends.

Pass rate: Not provided.

Where to find out more: Click here.

What we say: Expensive, but cheaper than an MBA. The pre-eminent qualification for London financial services professionals who want to escape the middle or back office. Better for sales and trading than corporate finance (for the investment banking division, try an MBA).

6. The CQF (Certificate in Quantitative Finance)

Run by: Paul Wilmott, a well known quant.

What they say: The CQF is, “designed for in-depth training for individuals working in, or intending to move into, e.g. derivatives, IT, quantitative trading, insurance, model validation or risk management.

Entry requirements: You’ll need to be (very) good at maths. Before you can start the course, you’ll have to complete a maths test.

Cost: Around £13k.

Study time: Four hours per week (delivered in the form of two two hour long weekly CQF lectures, delivered via webcast) for six months. You can watch 10 free sample lectures here.

Pass rate: Not provided.

What we say: The CQF has good international recognition and will sometimes be specified on job descriptions. It’s good if you want a risk modelling or model testing role, or if you want to be a quantitative developer building computer models for the quants who design banks’ complex derivative products. Most ‘front office quants’ will have a PhD or an MSc.

7. Series 7 (Full name: the General Securities Representative Exam)

Run by: The U.S. Financial Industry Regulation Authority. (FINRA)

What they say: ‘The Series 7 Examination is designed to assess the competency of entry-level General Securities Representatives…The Series 7 Examination is the General Securities Representative Qualification Examination.’ [In other words, this is mandatory. You have to pass the Series 7 if you want to work in sales or trading – but only if you want to work in the U.S.)

Entry requirements: You have to be working for a FINRA-member firm and they have to sponsor you. Series 7 isn’t really open to anyone…If you’ve been working in the UK, you might be allowed to skip some of the modules.

Cost: Employers usually pay.

Study time: You’ll probably need to study for 1-2 hours per day for six to eight weeks.

Pass rate: Around 65%..

What we say: You’ll have to have the Series 7 in the U.S. Hardly anyone has it in London or Hong Kong – unless they’ve transferred from Wall Street.

For the risk professional

8. ‘Risk in financial services’

Run by: The Chartered Institute for Securities & Investment

What they say: ‘Risk in Financial Services offers a comprehensive global introduction to the major risk areas in financial services. It addresses international issues, reflecting the needs of a worldwide market, and provides a sound grounding in the principles of the risk management framework, corporate governance and risk oversight. It covers specific techniques used in identifying, reducing and managing operational risk, credit risk, market risk, investment risk and liquidity risk.‘

Entry requirements: None given. However, the presumption is that you’ll be working in risk or compliance already.

Cost: Expect to pay around £300+ in exam fees. Or, £1.3k+ if you want tuition.

Study time: 100 hours for the Risk in Financial Services. An extra 70 hours if you want to supplement it with ‘UK Financial Regulation’. Some training providers off a three day intensive course.

Pass rate: Thought to be around 62%.

What we say: Rare.

9. ‘Professional Risk Manager Qualification’ (PRM)

Run by: The Professional Risk Managers’ International Association (PRMIA)

What they say: ”The Professional Risk Manager (PRM™) Designation is a globally recognized, graduate-level risk management credential.’

Entry requirements: You’ll need some work experience: 4 years if you don’t have a bachelor degree, two years if you do, and no work experience at all if you’ve been to graduate school of have passed an ‘accepted professional designation’ like the CFA.

Cost: $1.1k (minimum).

Study time: Candidates are required to pass four exams, varying in length from one to two hours. You’ll need to purchase exam vouchers along with study materials and the PRM handbook. The vouchers expire within three years of purchase.

Pass rate: 65% overall, but 59% for exams I and III and 78% for exam IV.

What we say: A well recognized international qualification. Often specified as a prerequisite for risk jobs in the U.S.

10. ‘The Financial Risk Manager’s Qualification’ (FRM)

Run by: The Global Association of Risk Professionals (GARP)

What they say: ‘The FRM Exam, offered by the Global Association of Risk Professionals (GARP), is a practice-oriented exam designed to assess a candidate’s knowledge and understanding of the skills necessary to function effectively as a financial risk manager. ‘

Entry requirements: To be able to use the FRM designation, you’ll need at least two years’ work experience in risk management, trading, portfolio management, academia, industry research, economics, auditing, risk consulting or risk technology.

Cost: Varies – it’s cheaper if you enroll sooner! $350 to $950 for each exam.

Study time: ‘On average, individuals devoted about 275 hours to exam preparation. Individual figures, however, varied from less than 100 hours (6%) to more than 400 hours (11%).’

Pass rate: Around 43% for part 1, 58% for part 2.

What we say: Popular qualification for risk managers, valuation specialists and product consultants. Recognized globally. Often specified alongside the PRM.

12. ‘The International Certificate in Risk Management’

Run by: The Institute of Risk Management

What they say: ‘This is the ideal qualification if you’re starting your career in risk management, if risk management is part of your job or you simply need a better understanding of enterprise-wide risk management.’

Entry requirements: None in particular. – ‘The qualification is the entry level qualification for anyone embarking on a career in risk management or working in a risk-related discipline.’

Cost: £1.7k to £3.4k depending upon whether you go for distance learning or ‘blended learning.’ You might get a discount if you’re in a low income country.

Study time: Three to five years, part time.

Pass rate: 60-70%.

What we say: Rarely seen in job descriptions. Most prevalent in the UK. Popular in retail banking and insurance firms.

For the corporate finance professional

13. The Diploma in Corporate Finance

Run by: The ICAEW in combination with the Chartered Institute for Securities & Investment.

What they say: ‘The New Diploma in Corporate Finance will equip you with advanced corporate finance knowledge, skills and expertise. It will enhance the value you bring to the organisations you work with and help accelerate your career.’

Entry requirements: You’ll usually need to have passed the ICAEW’s Chartered Accountancy exams or to have a Certificate in Corporate Finance.

Cost: £695 in exam fees, more if you want to pay for tuition.

Study time: On average, 500 hours of study are needed. It’s ‘achievable within a year.’

Pass rate: Thought to be around 69%.

What we say: Very are outside Europe. Not specified in job descriptions. Most common among strategists in corporates, accountants and lawyers. Good for Big Four accountants who want to move into M&A.

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Photo credit: Crayon Fence by chrismetcalfTV is licensed under CC BY 2.0.

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Morning Coffee: Top Morgan Stanley banker displays folly of the ‘internal move.’ John Cryan’s odd comment

February 10, 2016, 3:37 pm

≫ Next: 25 year-old rates saleswoman leaves UBS for Funding Circle

≪ Previous: Neither CFA nor MBA, other qualifications for jobs in banking

Aged 47 and with nearly three decades of banking experience behind him, you’d have thought Raj Dhanda might have known better. Instead, Bloomberg reports that Dhanda swapped out of capital markets (his comfort zone) and into wealth management (not his comfort zone). A mere 11 months later, he’s leaving the bank in pursuit of “other opportunities.”

Dhanda joined Morgan Stanley’s capital markets business in 1989 and worked his way through the ranks to become its co-head in 2009. Why, in the circumstances, did he go off on a tangent and become ‘head of investment products and services for wealth management’? Seemingly because James Gorman thought it would be a good idea. – Dhanda’s move was all part of Gorman’s attempt, “to give executives experience in multiple areas of the firm,” says Bloomberg. Gorman was trying to, ‘ strengthen the bonds between Morgan Stanley’s bankers and traders, many of whom work out of New York and London, and the brokers who serve retail clients across the U.S.,’ said the Wall Street Journal at the time.

Instead, Dhanda’s leaving. Maybe he wanted to go – the implication is that he left voluntarily – but maybe he’d have stuck around if he hadn’t made an internal move into an area completely unlike the one in which he’d developed a lifetime of expertise. You have been warned.

Separately, the Financial Times has detected something frankly bizarre in John Cryan’s uplifting memo to Deutsche Bank staff. Cryan said he wants his Deutsche comrades to, “regain our leadership in the equities markets”, points out FT – even though Deutsche has never been a big player in equities and is naturally inclined towards FICC. Maybe he’s getting Deutsche confused with UBS?

Meanwhile:

Moelis is hiring M&A bankers and restructuring professionals in London. (Financial News)

Goldman Sachs has created a new internal group combining its automated trading activities. It’s called Systematic Market Making and will be led by Konstantin Shakhnovich, who currently runs the bank’s Strategists groups across fixed income, currencies and commodities trading businesses.(Financial Times)

But who’s actually in charge of financial stability in the eurozone? (Breaking Views)

A brief reminder why banks are based in London. (John Kay)

UBS is looking at the relative pay of men and women while it reviews compensation in the investment bank. (Reuters)

UBS has also frozen salaries for people who’ve been promoted. (BloombergView)

The top and bottom performing hedge funds year to date. (Twitter)

HSBC, Barclays and Bank of America Merrill Lynch were the banks that gave the most gifts and hospitality to senior civil servants over the three years to March 2015. (Financial News)

Risk taking ‘global mindsets’ have gone out of fashion. (Bloomberg)

Collaborating is bad news when you’re a female economist. (HBR)

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25 year-old rates saleswoman leaves UBS for Funding Circle

February 11, 2016, 3:25 am

≫ Next: Credit Suisse is seconding IBD associates to work for clients

≪ Previous: Morning Coffee: Top Morgan Stanley banker displays folly of the ‘internal move.’ John Cryan’s odd comment

Another day, another highly able young analyst has decided to leave investment banking for the more vibrant world of peer-to-peer lending.

Last week it was Hugo Davies, a Loughborough University graduate, who quit Goldman Sachs to become a ‘capital markets associate’ at LendInvest Capital. This week, it’s Elisabeth Webb, a former hedge fund rates saleswoman at UBS, who’s quit to become a business analyst in risk and capital markets at Funding Circle, the peer-to-peer lending website co-founded in 2010 by Sam Hodges, a former associate at Pequot Capital Management.

Like Davies, Webb worked hard to get her role in banking – and jumped when she was finally established on the first rungs of the ladder. After leaving Paris Dauphine University she studied a Masters in Management at the London Business School and then completed two long off-cycle internships in rates sales at Deutsche and SocGen before landing a full time role at UBS in September 2014.

Now she’s given up on rates sales after leaving for Funding Circle in January. Funding Circle doubled its headcount in 2014 (the most recent year for which accounts are available) whilst doubling its loss to £10.9m. While revenues at the company are growing fast, doubts have been expressed over the peer-to-peer business model. Adair Turner, former head of the UK Financial Conduct Authority, and author of a new book on the perils of debt, predicted yesterday that, “the losses which will emerge from peer-to-peer lending over the next five to 10 years will make the worst bankers look like lending geniuses”.

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Photo credit: Escape by Martin Brigden is licensed under CC BY 2.0.

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Credit Suisse is seconding IBD associates to work for clients

February 11, 2016, 5:07 am

≫ Next: Wall Street compensation: What associates and VPs at U.S. bulge-bracket banks get paid

≪ Previous: 25 year-old rates saleswoman leaves UBS for Funding Circle

Credit Suisse has begun seconding associates in its European investment banking division to work for clients.

Recruiters in London say the bank has revived a programme last used in 2010 under which selected junior members of its banking division are given the opportunity to work for client companies.

Credit Suisse declined to comment on the programme, which is understood to be a vehicle for increasing young bankers’ knowledge of their sector. The latest round of secondees includes an M&A associate in the bank’s EMEA technology, media and telecoms (TMT) team, who’s gone to work for Deutsche Telekom in Germany.

The revival of Credit Suisse’s secondment programme comes after a weak start to the year for investment bankers in Europe. Financial News reported last week that fees from mergers and acquisitions, debt and equity issues and syndicated loans in Europe were about $1.4bn to February 5, making it the weakest start to the year since 2003. TMT M&A deals appear to have been particularly badly hit: year-to-date targeted EMEA M&A deals are worth just $5.7bn according to Dealogic, down from $26bn in 2015.

Compared to other European investment banks, Credit Suisse had a strong year in M&A in 2015: revenues rose by 21% on 2015, versus a decline of 7% at UBS and increase of just 1% at Deutsche Bank.

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Wall Street compensation: What associates and VPs at U.S. bulge-bracket banks get paid

February 11, 2016, 6:27 am

≫ Next: Steve Schwarzman’s advice for analysts and associates

≪ Previous: Credit Suisse is seconding IBD associates to work for clients

Bonus season is in full swing, but there isn’t a lot of excitement across Wall Street. While there are surely some exceptions, for the most part bonuses are either flat are down. Industry-wide bonuses are said by headhunters to be down an average of 10%.

That being said, big banks are feeling pressure to keep their associates and vice presidents happy. After all, private equity firms, better-performing hedge funds and Silicon Valley giants still want to lure away their best talent. For this reason, junior investment bankers and even mid-career-stage bankers may find that their compensation is a bit more stable year-to-year than that of managing directors who’ve become used to robust seven-figure bonuses.

So what do the biggest banks pay their best-performing associates and VPs?

Looking just at the top-quartile performers at bulge-bracket banks – Bank of America Merrill Lynch, Barclays, Citibank, Deutsche Bank, Credit Suisse, Goldman Sachs, JPMorgan Chase, Morgan Stanley and UBS – first- and second-year associates can expect their base salary plus bonus to add up to a figure in the $200k-$350 range, according to executive search firm Options Group.

Third-year associates at these banking behemoths who are in the top 25% among their peers can expect their total compensation to be in the ballpark of $275k-$450k, per Options Group.

Meanwhile, top-performing vice presidents at these financial institutions should expect their annual pay package, including their bonus, to hit a minimum of $375k, according to Options Group. However, depending on a range of variables, the cream of the crop at the VP level could attain total compensation around $925k, spitting distance from a cool million.

So while this won’t be a banner year for bankers’ compensation by any means, these figures indicate that VPs – and even associates – who avoid the chopping block by achieving top-tier performance will be just fine, thank you very much.

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Photo caption: Sean Prior/Hemera/Thinkstock

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Steve Schwarzman’s advice for analysts and associates

February 11, 2016, 8:57 am

≫ Next: Delayed bonuses bode badly at Deutsche Bank

≪ Previous: Wall Street compensation: What associates and VPs at U.S. bulge-bracket banks get paid

Steve Schwarzman, CEO of Blackstone, is not shy about handing out careers advice. Last year he cautioned against supposing you can leave an investment bank and have the sort of success he’s had. Now, he’s back, warning juniors of all the things that might destroy their finance careers before they’ve really begun.

In a long interview with the MBA website Poets and Quants, Schwarzman, who was a managing director at Lehman Brothers before moving into private equity, lists the following fatal errors when you’re starting out in financial services.

1. Don’t be difficult

“It’s very important that people understand that we only have people who want to be helpful, team-oriented, and believe in a meritocracy culture,” says Schwarzman. “We’re not looking for people who want to create more stress with people around them,” he adds. “So the firm internally should be a highly supportive environment and we’re very rigorous in making sure that’s what it is.”

2. Don’t try to reinvent the wheel

“In finance, there is very little new. It is an apprentice business…there’s no need for you to invent things that other people understand…Typically, the biggest mistake that first-year MBAs make is wasting their time trying to figure out something…There isn’t extra credit for figuring it out yourself. They just want you to do it.”

3. Don’t accept everything that’s asked of you

“You don’t need to take on too many assignments to be successful,” says Schwarzman. Junior bankers think working on a lot of things is good and accepting everything is right. Wrong. “Since entry level people typically don’t know how long it takes to do anything, they all make the same mistake, which is that they accept too many things. And then they can’t finish them on time and they disappoint the people who asked them to work on those things.”

4. Don’t disguise the fact that you’re drowning

If you have accepted too much work, say so.

“If you show up at the last moment and say, “I’m sorry I just couldn’t do your thing because I was doing something else,” you can make an enemy because you embarrassed someone senior to you who trusted you,” says Schwarzman. “… as soon as you’re aware that you’ve taken on too much, you must go to someone senior and tell them what problem you’ve created for yourself. They will help you manage your way out of it so that all the work gets done, whether it gets done by you or gets done by someone else.”

Whatever you do, don’t wait until the last moment and then reveal you haven’t completed a critical part of analysis.

5. Don’t assume you can get back in

Don’t leave banking when you’ve only worked in the industry for a few years. “I’ve seen this with very smart younger people whose careers have typically been ruined by going out too early,” says Schwarzman. Finance is an apprenticeship business, he adds: “…it takes a while to develop the skills and perspective to know what you should be doing when.”

When you leave for something else and it doesn’t work out, Schwarzman says it’s very hard to slot back into banking.

6. Don’t try to become a Fintech entrepreneur unless you’re super-human

Lastly, just because you’re an excellent associate in an investment bank, that doesn’t mean you’ll be an excellent entrepreneur.

Entrepreneurialism is only for the best of the best, says Schwarzman. “You have to be extremely good, at the top of your group for sure, in terms of whatever aspect of finance that you’re in,” he says. More than that, he says you have to be, “an independent person, who can deal with the isolation and the difficulties of being on your own…. You have to have supercharged energy and be prepared to go through a period when things are very, very harsh. That’s typically is not someone who’s an associate. They’re not even emotionally up to that kind of journey. Some of them don’t know that – and they wipe out.”

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Delayed bonuses bode badly at Deutsche Bank

February 12, 2016, 3:51 am

≫ Next: This Swiss bank pays a small fortune

≪ Previous: Steve Schwarzman’s advice for analysts and associates

In any normal year, bankers at Deutsche Bank would be readying themselves to learn their bonuses now – Deutsche typically announces in early February. This, however, is not a normal year.

CEO John Cryan declared his intention to delay bonuses by a month in a memo to employees last October.

That’s unfortunate. Although shares in Deutsche Bank have risen 10% this morning, they’re still down 30% since January. Moreover, 2016 isn’t panning out as well as expected in terms of revenues. As Morgan Stanley’s head of trading, Edward Pick, said this week, ““The year started out OK, but it’s been a lot choppier since.”

In other words, the longer 2016 goes on, the greater the incentive for banks that haven’t already announced bonuses to quietly cut their allocations.

“The reality this year is that the earlier you were paid, the better,” says the head of one M&A search boutique. “As time goes on, numbers are being ground down as the market deteriorates.”

With US banks already announcing bonuses in mid-January, headhunters in London say the contrast between payments at US banks (Goldman Sachs, J.P. Morgan, Citi and BAML) and European banks is likely to be particularly stark this year. BNP Paribas, SocGen, Barclays, RBS, and HSBC have also yet to inform staff of their numbers. As we reported in December, Barclays is said to have delayed the announcement and payment of 2015 bonuses until March this year, although announcements will take place later in February as usual.

M&A boutiques have also yet to inform staff of their payments. Some, such as Gleacher Shacklock, are rumoured to be paying later than usual.

A partner at one M&A boutique in London said later payments are standard in the boutique sector: “We’re a price taker, not a price maker. We want to see what everyone else is paying and to make sure we’re not offering more than elsewhere.”

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This Swiss bank pays a small fortune

February 12, 2016, 5:37 am

≫ Next: What analysts, associates, VPs, and MDs really do in investment banks

≪ Previous: Delayed bonuses bode badly at Deutsche Bank

While Deutsche Bank and bonuses are delaying bonuses, perhaps fatally, one Swiss bank has set aside a small fortune to pay its staff for their efforts in 2015.

That bank is….Vontobel.

As an investigation into pay at Swiss banks by our German editor reveals, Vontobel pays very well indeed. Particularly if you work in its asset management division.

In fact, Vontobel’s asset managers are paid, on average, not only more than investment bankers and asset managers at other Swiss banks, but more than investment bankers and asset managers everywhere.

So, how do you get to be a part of Vontobel’s elite asset management group? Firstly, you’ll probably need to be based in Switzerland. Vontobel Asset Management has offices in NYC and is growing in London (it’s in the process of buying TwentyFour Asset Management), but 1,201 of Vontobel’s total 1,493 staff are in its home country. Secondly, you’ll need to be lucky: Vontobel’s asset management division only employs 308 people in total. The good news, however, is that Vontobel Asset Management is growing – it hired nearly 50 people in 2015 and TwentyFour Asset Management says it’s recruiting in London.

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What analysts, associates, VPs, and MDs really do in investment banks

February 12, 2016, 5:50 am

≫ Next: Morning Coffee: How to make a fortune from the most boring job in banking. Poetry at Goldman Sachs

≪ Previous: This Swiss bank pays a small fortune

What do investment banking job titles really signify? Do analysts really analyze? Are vice presidents in charge of whole divisions? And do managing directors run the entire bank? No, no, and no again.

Banking job titles aren’t what they seem. They often make people sound more important than they actually are. Ex-Goldman banker turned academic Alexandra Michel says this is because banks aren’t like other organisations: the average career in an investment banking division (IBD – including M&A and equity or debt capital markets) lasts less than a decade. Yes, you get a big job title unusually quickly in banking, but if Michel’s right it might not last.

What analysts really do in investment banks:

If you leave university after a first degree (or a Masters), you will enter an investment bank as an analyst. Analyst is simply a euphemism for being at the bottom of the banking hierarchy.

What do analysts do? If you work in an investment banking division (IBD), you will research companies that might be involved in a deal, you will build the financial models which value the companies you’re looking at. And you will assemble your findings into a Powerpoint presentation.

“Junior bankers are experts on financial modeling,” says Michel. They are experts in Excel and VBA. They are also experts in building the PowerPoint presentations that banks use to communicate their ideas to clients. “The more junior you are in M&A, the more time you will spend working on Excel models and PowerPoint Presentations,” says Mark Hatz, a former Goldman Sachs analyst who now helps students prepare for banking interviews.

A current M&A analyst at European bank says analysts do what they’re told: “The analyst is the person who does all the administration work necessary in the deal process. As the most junior person, you might work on research, you might create the materials for the pitch-book which presents banks’ ideas to clients, and you might work on the financial models – but what you do will be quite basic.”

Michel says analysts don’t like to be reminded of their status. During her detailed research in two Wall Street banks, Michel came across an analyst who burst into tears after being introduced to a client as such. “You introduced me as an analyst!”, the analyst complained (crying) to a vice president.

How long will you be an analyst for?

Traditionally, people have been analysts in investment banks for three years. However, this is changing. Goldman Sachs introduced an ‘accelerated analyst’ program in November 2015, under which it promotes its analysts to associates after two years instead of three. UBS has something similar.

How much are you paid as an analyst?

Despite being at the bottom of the pile, analysts in investment banks are paid pretty well. In London, for example, they can expect to earn anything from £72k to £102k ($104k to $147k) over years one to three.

How many hours do you work as analyst?

The downside to being an analyst in IBD is the working hours. When people talk about 80 hour weeks in banking, it’s analysts their referring to. Most banks have got policies in place to cut analysts’ working hours, but it’s still common to work from 9am to midnight – or later.

What associates really do in investment banks:

After you’ve done your two or three years as an analyst, you should get promoted to an associate. You can also enter a bank as an associate after studying an MBA – although this is harder than it used to be. Associates are like analysts, except more important.

“As an associate you’re still working on the PowerPoint slides, still managing the presentation,” says the M&A analyst, “- But you also work more on the [financial] models.”

The associate’s role is partly to, “guide the analyst in preparing the presentation and doing the research,” he says. The analyst does the work and the associate checks it. “The associate’s still an important part of the process. If you have a 50 page presentation, the analyst will usually do 30-40 pages and the associate will check them and do the rest.”

How long will you be an associate for?

If you last the course, you’ll be an associate for three years.

How much are you paid as an associate?

Associates on Wall Street can expect anything from $200k to $450k over the course of their three years according to the Options Group. Associates in London can expect anything from £146k to £204k ($212k to $295k).

How many hours do you work as an associate?

Associates usually – but not always – work a few hours less each week than analysts. “You’ll often see the associates going home at 11pm instead of midnight,” says one analyst. “But that kind of depends upon the person and how good the analyst is. If you’re a lazy associate with a good analyst, you can leave early. If you’re an ambitious associate with a bad analyst, you’ll still be working at 2am.”

What vice presidents (VPs) really do in investment banks

It’s when you get to vice president (VP) level, that things start to get interesting. Suddenly, you’re more outward facing – you actually get to talk to clients. However, you also oversee the process of putting the client presentations together.

Vice presidents help to manage clients on a daily basis, says Michel. They also manage the associates and (by default) the analysts and make sure the necessary financial models and Powerpoint presentations are being built. “VPs lead the layout of the presentations,” agrees Hatz. “They’re responsible for making sure the pitch documents are put together and they will also have an active daily role in executing any deals that go ahead.”

“The VPs guide the analysts and associates,” says the analyst in M&A. “They’re running the deal process on a daily basis. – They’re the ones saying which materials need to be created. However, they’re also the ones who speak on the calls to the clients. They help keep the clients up to date with how things are progressing.”

How long will you be a VP for?

Once you get to VP-level, the process of rising up through the investment banking ranks becomes more erratic. Sometimes people get stuck at vice president forever and ever. Most banks are trying to cut the number of expensive people they have at the top of their pyramids, and this is making it harder to get promoted. Goldman Sachs, for example, only promotes around 400 people to managing director every two years and has 12,000 vice presidents in total…

How much will you be paid as a VP?

Because VPs can vary wildly in terms of experience, their pay often varies widely too. On Wall Street, pay for VPs can be anything from $325k to $925k according to the Options Group. In London, salaries alone can be as high as £175k ($253k) for bankers at VP level.

How many hours do you work as a VP?

As a rule of thumb, you should work fewer hours as a VP than as an analyst or associate. “The associate is running the process for the VP, so the VP gets to leave earlier,” says the analyst. This doesn’t mean they leave early, however. “Our VP goes home around 10pm,” he adds.

What directors and managing directors do in investment banks:

Some banks have an intermediate level of directors (Ds) between VPs and managing directors (MDs).

And what do Ds and MDs do exactly? Michel points out that their main responsibility is bringing in new business. There’s a lot of travelling. It’s not really as glamorous as people think. MDs also oversee everyone further down the hierarchy and make sure their treasured clients are happy.

“As a director, you’ll speak a lot with the clients,” says the analyst. “Your role is to act as the interface between the client and the rest of the team.”

Managing directors are at the top of the investment banking pile. “They talk to the clients, meet the clients, bring in the revenues and build the business for the bank,” says the analyst. “They’re the connectors – the relationship builders – they’re out there, finding out what’s going on with their clients in their industry.”

How long will you be a D or MD for?

Although some people are VPs forever, you’re usually promoted to director after about three years in a VP position. Once you’re a director, Michel says it should (ideally) take only another two years before you make managing director. This may be wishful thinking, however. – Research suggests most people only become MDs after 15 years in banking, and even then only 20% of them are promoted, max.

Once you make MD, the pressure will be on to bring in revenues. If you don’t deliver you’ll be out. If you do deliver, you can expect to last a while. The average tenure of managing directors and partners at Goldman Sachs, for example, is thought to be around eight years.

How much are you paid as a D or MD?

Pay for directors and managing directors varies wildly from person to person. As an MD in IBD on Wall Street you will almost certainly earn in excess of $500k in total compensation. In London, MD salaries alone are £350k ($500k)+.

How many hours will you work as a D or MD?

As a director, you’ll typically work fewer hours than a VP. – You might go home at 8 or 9pm. As an MD, your hours will assume a life of their own. “Sometimes we don’t see the MDs in the office much,” says the analyst. “- Their jobs are a bit more freestyle and flexible. They might be out of the office for a week, meeting clients. They might have a lunch with a client, and then a coffee, and then a meal with another client. They might go and meet a COO who’s also a personal friend.”

The upshot of all this, according to Michel, is that investment banks are far more egalitarian places than people assume. In IBD, she says most people actually do get promoted up to the next level. This makes banks less competitive places than people expect. Power differentials are minimized and everyone (according to Michel) works for common purpose. Unfortunately, she also concludes that this leads to overwork and burnout.

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Morning Coffee: How to make a fortune from the most boring job in banking. Poetry at Goldman Sachs

February 14, 2016, 9:06 pm

≫ Next: The top 10 companies U.S. finance professionals want to work for

≪ Previous: What analysts, associates, VPs, and MDs really do in investment banks

Compliance jobs in banks are growing fast, but within compliance one particular subset is growing faster than any other: compliance monitoring. The men and women who spend their days replaying conversations between traders and salespeople are reportedly proliferating faster than doubts about the soundness of the European banking system.

According to a new study by PWC, big banks already employ as many as 50 people each just to read staff emails and listen to staff calls, and that number is growing fast. Monitoring the communications in question is something of a Sisyphean task: PWC estimates that there are, ‘tens of billions of emails, instant messages and phone calls between the 140,000 people who work in banking in London every year.’ It’s also pretty boring – unless you happen to find listening to thousands of hours of traders’ banter an interesting pastime.

Where there’s a labour-intensive menial job, however, there’s always the potential to make a fortune from automating it. PWC reports that banks are due to spend £156m on surveillance technology this year alone. The Holy Grail is software that can listen to telephone calls: devising this is reportedly especially challenging because ‘even the most advanced voice technology can be circumvented.’ Gauntlet, thrown.

Separately, Goldman Sachs is encouraging aestheticism in its staff. The firm has been running ‘poetry workshops’ and ‘poetry sharing’ sessions as part of its Talks at GS Program. The sessions were hosted by John F.W. Rogers, a Goldman executive officer described by the New York Times as having an, ‘ability to make himself indispensable to powerful people’ – for whom literary erudition may well be part of the appeal.

Meanwhile:

HSBC decides to stay based in London because, it “delivers the best of both worlds to our stakeholders.” (Telegraph)

Citi thinks it’s found a way of circumventing the EU restrictions on bonuses: it will simply stress that it’s senior staff in London are responsible for global businesses. (Financial Times)

RBC Capital Markets just hired Martin Copeland, a former banker at Deutsche Bank and UBS whose last role was as a managing director at Evercore. (Financial News)

The UK’s Warwick University is launching a new graduate programme in central banking, taught by Paul Fisher — the man who, as director for markets at the Bank of England, turned the theory of quantitative easing into a practical asset-buying programme. (Financial Times)

If all goes well, Brian Moynihan (CEO of Bank of America) just got a 23% pay hike. (WSJ)

M&A bankers are not as safe as they seem. (Bloomberg)

Private equity staff arrive late and work late: ‘When he arrives at Terra Firma’s London office at 8am, “it’s just me and the secretary”. In contrast, when he leaves at 9pm, “the whole place is buzzing”.’ (Sunday Times)

Financial analysts marry middle school teachers. (Bloomberg)

Plotting every financial crisis since 1980. (Twitter)

Lesbians earn more than heterosexual women. (Economist)

Today’s 25-year-olds need to save the equivalent of £800 a month over the next 40 years to retire at 65 with an income of £30k a year, (Financial Times)

Online dating horror stories: He was terribly rude, condescending, kept talking about his job (he was an investment banker…). (The Awl)

Why negative interest rates are a nightmare. (Marginal Revolution)

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Photo credit: Listening Device by RV1864 is licensed under CC BY 2.0.

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The top 10 companies U.S. finance professionals want to work for

February 15, 2016, 4:52 am

≫ Next: HSBC cut 22% of UK bankers since 2010, but Citi and Goldman have been growing

≪ Previous: Morning Coffee: How to make a fortune from the most boring job in banking. Poetry at Goldman Sachs

Financial services professionals in the U.S. agree with their counterparts in the U.K. and Asia on at least one thing – more of them want to work for Goldman Sachs than any other organization, according to the eFinancialCareers 2016 ‘Ideal Employer’ rankings.

In fact, the top five employers – based on a survey of more than 6,500 financial services professionals in the U.K., U.S. and Asia – were the same across all regions globally. J.P. Morgan, the largest bank in the U.S., came in second place, followed by Silicon Valley behemoth Google. Midtown Manhattan-based Morgan Stanley secured the fourth position on the list, while BlackRock, the largest asset management firm in the world, rounded out the top five.

Rank (*)		Company
(*) Global Rank View the complete 2016 Ideal Employer US Top 20
1 (1)		Goldman Sachs
2 (2)		J.P.Morgan View US Jobs
3 (3)		Google
4 (4)		Morgan Stanley
5 (5)		BlackRock View US Jobs
6 (10)		Bank of America Merrill Lynch View US Jobs
7 (7)		Citi
8 (14)		Blackstone
9 (26)		Fidelity View US Jobs
10 (11)		Deutsche Bank View US Jobs

The common denominator is survey respondents’ perception that they all pay a competitive salary – 84% of the respondents who stated that Goldman Sachs were one of their ideal employers thought that salary was a strength of the firm. BlackRock also scored 84% among U.S. financial services professionals, followed closely by Google at 83%. The only firms scoring higher in that metric landed outside the top five overall: McKinsey & Co. (17th overall in the U.S.) at 89% and Credit Suisse (15th overall in the U.S.) at 86%, while asset manager Wellington Management Co. (18th overall in the U.S.) tied for fourth in that category with 83%.

Goldman led all other firms in the competitive bonus category with 85%. Hedge fund giant Bridgewater Associates and Wellington Management Co. tied for second in that metric with 83% of mentions among U.S. respondents.

Employers scoring better in the U.S. than globally

Bank of America Merrill Lynch ranks sixth overall in the U.S. compared to 10th globally, perhaps due to the strength of its domestic wealth management business. Looking across the various categories, it didn’t score off the charts in any single one, but it did get at least 60% for perceived strengths in attractive benefits, opportunities for promotion and work with key industry players.

Citibank achieved seventh overall both in the U.S. and worldwide, with challenging/interesting work (63% among U.S. respondents), opportunities for promotion (60%) and salary (65%) perceived to be its strengths.

Like BofA Merrill, the rest of the U.S. top 10 list did better in America than globally, including the Blackstone Group, the largest alternative investment firm and the top-ranked private equity firm. It ranks eighth domestically compared to 14th worldwide in the eFinancialCareers research. In addition to compensation, U.S. survey respondents cited Blackstone’s strengths as challenging/interesting work (77%), innovator (75%) and leader (73%) in the industry.

Fidelity – one of the most dramatic examples – placed ninth in the U.S. versus 26th globally, due in part to its nationwide bricks-and-mortar presence, and Deutsche Bank was 10th vs. 11th.

In addition, Apple (tied for 12th vs. 16th), Wells Fargo (11th vs. 30th), Bridgewater Associates (14th vs. 35th) and Wellington Management Co. (18th vs. 45th) all did significantly better in the U.S. compared to the global survey results.

On the other hand…

Firms that still made the U.S. top 20 but which ranked lower here than globally include UBS (tied for 12th vs. sixth), Credit Suisse (15th vs. ninth), McKinsey (17th vs. 13th) and HSBC (20th vs. eighth).

View the complete 2016 Ideal Employer Global Rankings

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HSBC cut 22% of UK bankers since 2010, but Citi and Goldman have been growing

February 15, 2016, 5:05 am

≫ Next: Why last week’s fuss over AT1 bonds is bad news for bonuses

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HSBC is staying in London! Or is it? While the British-based bank has opted to remain indefinitely headquartered at Canary Wharf, CEO Stuart Gulliver said this morning that if the UK leaves the EU, “a chunk of employees” in HSBC’s global markets business will likely move to Paris.

HSBC isn’t the only bank making threatening noises about its London-based staff. Credit Suisse is cutting 30% of its London headcount and has already begun moving prime services traders to Dublin. Goldman Sachs says it’s switched its hiring to ‘low cost centers’ and has opened a new technology-focused office in Warsaw. And Jim Cowles, Citi’s chief executive in EMEA, told the FT today that the bank has already moved 850 jobs out of London in the past few years and “will continue to look to reduce” the number of staff it has in the city.

Figures for leading banks’ UK headcount tell a more nuanced story, however. As the chart below, taken from the number of registered employees each bank has with the UK Financial Conduct Authority (FCA), shows, some banks have substantially increased their UK headcount since 2010 – Citigroup Global Markets among them.

The FCA’s figures suggest Citigroup has hiked registered headcount in its UK global markets division by over 20% since 2010. Within the UK, most of Citi’s global markets staff are based in Canary Wharf, although the bank also has technology operations in Belfast.

Goldman Sachs International has also increased UK-based headcount since 2010, with the addition of 167 people – a rise of 8%.

By comparison, the biggest cuts in UK registered headcount over the past six years have come at HSBC and Credit Suisse, with both banks have trimming staff by more than 20%.

London hasn’t suffered disproportionately, however. Credit Suisse’s 21% cut in its UK headcount over the past six years matches the 21% cut in its investment banking headcount globally over the same period. HSBC is in the process of cutting 20% of global headcount and may have sliced into UK staff ahead of time. And Deutsche Bank cut 25% of its front office investment banking staff since 2010, whilst reducing its registered staff in the UK by a mere 7%.

London is less appealing than it was a location for investment banking jobs. But the experience of the past six years suggests that while some banks talk loudly about moving jobs out of the UK, they don’t always do so.

Find out which investment bank ranked #1 in the 2016 eFinancialCareers Ideal Employer Rankings

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Photo credit: Canary Wharf in the dark by *Psyche Delia* is licensed under CC BY 2.0.

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Why last week’s fuss over AT1 bonds is bad news for bonuses

February 15, 2016, 6:57 am

≫ Next: What working hours in investment banks are like in 2016

≪ Previous: HSBC cut 22% of UK bankers since 2010, but Citi and Goldman have been growing

The mandatory payment of coupons on AT1 bonds (CoCo bonds), is suddenly a thing. As a reminder, the bonds, which have become a popular vehicle for raising bank capital ever since Barclays, Credit Suisse and UBS issued them 2012 were meant to be flexible when it came to coupon payments. Unlike normal bonds, banks issuing AT1s have an option whether to pay coupons or not: if they don’t want to pay the coupons on AT1s, they theoretically don’t have to, even if the bonds aren’t in default.

Last week’s upset with Deutsche suggests it’s not quite as simple as this.

Following a note by research boutique Creditsights which questioned Deutsche’s ability to pay coupons on its CoCos in 2017, all hell was let loose. The bonds were downgraded, their yields soared and Deutsche’s share price plummeted.

The situation has since been remedied by Deutsche’s insistence that it has “sufficient reserves” to pay its CoCo coupons, but neither the German bank nor any other firm which has issued CoCos will want to risk even the merest intimation of non-payment again.

This is unfortunate if you happen to work for a bank with plenty of AT1 bonds outstanding.

As Dan Davies, senior research advisor at Frontline Analysts, helpfully pointed out on Twitter at the weekend, CoCo bond coupon payments and bonuses are in direct competition when banks are in straitened times.

In Europe, both CoCo coupons and bonuses are counted in regulators’ calculations of the ‘Maximum Distributable Amount’ (MDA) that banks can give away whilst maintaining a necessary level of capital. For this reason, Coco coupons and bonuses are “in direct competition,” says Davies.

After last week, guess which of the two will win?

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Photo credit: Niveau de carburant – Fuel gauge by Humanoide

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What working hours in investment banks are like in 2016

February 15, 2016, 8:58 am

≫ Next: Deutsche Bank has just hired the ex-head of SSA trading at RBC

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In theory, investment banks have cut working hours for their most junior staff. Since 2013 most leading banks – Morgan Stanley excepted – have introduced a raft of measures ensuring their juniors don’t overdo it. Goldman Sachs has also introduced ‘accelerated analyst programs’ to help its juniors get off the bottom rung sooner.

If you ask junior bankers about their working lives in 2016, however, they don’t sound entirely different to the experiences of previous generations.

“There are no limits on working hours here,” says an M&A analyst at one of the European banks which theoretically introduced limits to working hours in the past few years. “We usually work every weekday from around 9.30am until around midnight or 12.30am. It’s a minimum 75-hour week.”

Plus ça change. When Wall Street Oasis asked bankers how many hours they were putting in per week in 2014, their responses varied from 67.6 at Morgan Stanley to 88.9 at Moelis & Co. Two years on, things sound pretty similar.

“I worked 70 hours last week,” says an analyst at RBS, which as a state owned institution might be expected to go easier on people. “There are no restrictions on our hours at all. It’s normal to work from 9am to midnight.”

What about weekend and nights, both particular targets of banks’ efforts to protect juniors’ health? The analyst at RBS said he hasn’t worked any nights recently. The analyst at the other European bank said working nights and weekends happens, but not as a matter of course. “It’s like every week there’s a day you don’t sleep. It’s most likely that you work through the night once every three weeks,” he says. “And when you do work late, allowances are made elsewhere. I was in the office until 2am a lot last week, but then I didn’t work at the weekend.”

When necessary, however, working all weekend is still de rigueur. “I was on a transaction from September to November, and I didn’t have any weekends off,” says the analyst. “Some weekends I was working 15 hours a day.”

Nor is it possible to generalize about working hours by bank. Analysts point out that working hours in fact differ from team to team and deal to deal. As a rule of thumb, Financial Institutions Group (FIG) M&A teams which deal with financial clients will work you harder than the rest. And when one of the parties to a deal is a financial sponsor (private equity fund), you can expect them to be less respectful of rest-periods like evenings and weekends than a family run confectionery firm.

“No matter who your client is, as you get into the final weeks and you’re trying to close a deal, you almost certainly going to be doing crazy hours,” says the analyst. “On average, we’re working an 85-90 hour week.”

Find out which investment bank ranked #1 in the 2016 eFinancialCareers Ideal Employer Rankings

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Photo credit: City of London Nightview – by Ian Turk is licensed under CC BY 2.0.

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Deutsche Bank has just hired the ex-head of SSA trading at RBC

February 16, 2016, 2:12 am

≫ Next: “This industry is awash with A* students after my job”

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Deutsche Bank hiring freeze doesn’t appear entirely impervious to some thawing. The German bank just hired Igino Napoli, the former head of head of sovereign, supranational and agency (SSA) trading at RBC Capital Markets.

Napoli joined Deutsche Bank in late January, according to filings on the Financial Conduct Authority register, having left RBC in August.

Napoli only joined RBC as head of SSA trading debt in October 2014, after spending five months at ANZ. Before this, he was head of covered bond trading at Jefferies for four years.

Napoli is the latest of a select band of senior bankers and traders recruited by Deutsche Bank in recent months. In theory, the German bank has imposed a hiring freeze as it looks to shed another 7,000 jobs net by 2020.

Deutsche Bank isn’t shedding jobs everywhere, of course, despite the renewed focus on cost-cutting. When John Cryan outlined the bank’s ‘Strategy 2020′, he said Deutsche will hire in areas like M&A and equities. By comparison, jobs are expected to go in areas like securitised trading, flow credit, agency residential mortgage backed trading and CDS trading.

Napoli was among the 104 former Dresdner Kleinwort bankers who successfully claimed for €52m in unpaid bonuses against Commerzbank in 2012. He was among the three highest paid of all the claimants – asking for £2m in unpaid bonuses.

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“This industry is awash with A* students after my job”

February 16, 2016, 3:56 am

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Firstly, a confession: I was not an A* student. I do not have 530 UCAS points or a GPA of 94%. I don’t speak three languages fluently. I didn’t attend an elite university in the UK or elsewhere. I didn’t go on an overseas placement from that elite university I didn’t attend to spend time at another elite university overseas. I didn’t participate in a spring internship, a summer internship, or a winter internship. I didn’t know that I wanted to work in banking and then on the buy-side in my late teens. But I do, and more and more people want to too.

Today, I’m a portfolio manager and analyst in a macro fund in London. 15 years ago, I was a recent graduate from a top tier Russell Group University (one of Britain’s top 24 institutions). I was 21 years-old, living with my parents in London, with no internships and no big names on my CV. My only option for getting into finance was as a ‘temp’ in the settlements division of a large US bank.

In 2001, the finance industry was a lot more fluid than it is now. This was pre-Jérôme Kerviel and Kweku Adoboli, and banks were less worried about the potential for malfeasance if they promoted people with knowledge of back office processes into front office roles. I spent three months in settlements before spotting an opportunity to move into a credit research position. The bank had a junior research vacancy and I had the advantage of being in situ. Temping meant that you got to interview for positions that were going internally. It also meant that I was able to read the bank’s research reports and that I therefore knew what I was talking about in the interview – and had the money to buy the suits and shirts that made me look the part.

After three months temping, I therefore moved into a role that set up my career and allowed me to move to the buy-side. Would I be able to do this today? No. Nowadays, the City of London is a very different place. Today, the City attracts the best of the best from everywhere in the world. I recruit juniors for my employer and they’re all A* students from top universities globally.

Do I feel insecure? Yes, when I read about the ‘juniorisation’ of the industry with experienced, expensive, senior staff being let go. Overall, this industry is shrinking. A lot of trading jobs are disappearing as automation takes hold. New skills are needed: speaking a second language is increasingly important – especially if you’re interested in working on emerging markets. The temping route I took into the market no longer exists. The best bet for a young person in my situation today is probably going for an entry-level job in a small distressed debt fund. It won’t pay you for the first few years, but it’s an apprenticeship and you should get some very hands-on learning with industry veterans.

What’s the future for the 30-something ‘veterans’ like me? Can we survive in this industry faced with the inundation of exceptional talent from Asia and Continental Europe? Clearly we need to be at the top of our game and to bring our experience to bear on these difficult markets. But we also need to be modest, and kind. It’s never been more important to be pleasant to people on the way up – you never know who you’re going to meet on the way back down.

*Niall Wagner is a pseudonym