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The goodbyes were emotional – on leaving UBS, Andrea Orcel quoted Winnie the Pooh and said “How lucky I am to have something that makes saying goodbye so hard”. The hellos were not much less gushing; Ana Botín reminded us that “Andrea has worked closely with us for the past two decades, in the development and execution of our strategy, and understands and is aligned with the Santander culture”.

And so it was that one of the top investment bankers of a generation, the man who was paid $30m in a single year at Merrill Lynch, left his post as head of UBS’s investment bank to be the new CEO of Banco Santander. But once the tears of sadness and joy have dried, what should we expect from the future?

It’s certainly not a normal CEO promotion move. The top job at Santander is not the CEO, it’s the ranking member of the founding Botín family, currently Ana. And the outgoing CEO, José Antonio Alvarez is not leaving, retiring or going out to pasture; he’s going to be the executive vice-chairman and the CEO of Santander Spain. So since Orcel is not exactly moving out of a new-found desire to run a Spanish retail bank, what’s the plan?

The press release gives few clues, but there has to be a strong suspicion that if you hire a baker, it’s because you want to make some bread and if you hire a deal-maker, it’s because you want to make some deals.

But what deals? It might pay to think big. We know that Santander has had success in the past in turning round franchises with serious operational and IT problems (Abbey National). We know that it’s often been prepared to buy a large group in order to get the parts it wants, sometimes working with others to do so (ABN Amro). We know that it’s prepared to pay up if it has to (Banespa) but it would rather get a bargain from a distressed seller (Sovereign) And we can also guess that the European regulators regard Santander as a safe pair of hands, and maybe even owe it a favour for helping them out of a sticky spot (Popular). Nearly all of these were deals on which Andrea Orcel advised, by the way.

So, can we think of any possible targets that might fit the template? Is there, say, a blue chip brand that’s fallen on hard times that have brought it well within the feasible valuation range? Possibly one that’s even fallen out of its domestic stock index and the Eurostoxx? A bank that’s a bit of a sprawling conglomerate, with some operations that have been reviewed for possible sale in the recent past? Maybe one that’s had a lot of regulatory trouble and is notorious for its rat’s nest of IT and operational problems?

It would have to be something with excess costs that could benefit from Santander’s cost-cutting approach – possibly even something with an investment bank where Andrea Orcel could repeat his successes from UBS. And it would be nice if it had a strong payments franchise, and maybe a branch network that would provide synergies in a core European market where Santander has an existing second-tier operation. The icing on the cake would be if a target could be found with a low average risk weight on its balance sheet, giving the potential for a capital arbitrage. Can anyone think of a bank that fits those criteria? Maybe even … a German bank?

“SantanDeutsche” doesn’t feel like it’s something that’s going to happen in the immediate future. There’s a lot of movement in Euroland that would have to happen before any major cross-border mergers could seriously be considered, let alone one that would take out the German national champion. But … never say never. Deutsche Bank is not exactly an ornament to the German national pride at the moment, and if Europe is ever going to be taken seriously as a Banking Union, it can’t rule things out just for reasons of national amour propre. And whether or not it’s Santander, Deutsche employees might do well to look back at that list of things that make it an attractive target, and think about what would happen to their particular part of the bank if someone decided to break it up. Stranger things have happened.

To give an idea of the scale of things these days, JP Morgan have spent half of Deutsche’s market capitalisation on fintech investments this year alone. In an interview with the FT, CFO Marianne Lake claims that the $10.8bn spend so far this year isn’t really the result of an attempt to use a “financial bazooka” to leave the competition behind. It’s more of a matter of spending a hundred million here, a hundred million there and before long you’re talking about real money – 10% of JPM’s revenues, roughly.

Nonetheless, whether the intent is to intimidate or not, the program appears to be having that effect, particularly on European peers who can hardly remember the days when they weren’t having budgets cut for speculative spending on new tech. It’s a picture that some of them have seen before; in the 1990s, banks which were unable to develop their own value-at-risk systems ended up building on the open RiskMetrics platform developed by JP Morgan. Now they’re being offered the opportunity to join the Interbank Information Network, the JPM open blockchain project. The consistent theme is that JPM first outspends the rest of the banking sector, and then helps to lock them into the technology choices it made. If your main interest is working in tech for a standard setter rather than a standard follower, you might want to bear this multi-decade track record in mind.

Meanwhile

The regulators of the world are getting a bit irritated by the industry’s inability to get its act together (again). This time, it’s because people are still linking an increasing number of derivatives contracts to LIBOR, despite the fact that the “big switch off” is only in 2021, after which it’s not certain that the rate can be calculated consistently with the regulations that will come in. They are now asking for specific names of managers responsible for the transition process. (FT)

New Financial, the City thinktank, has challenged the buy-side’s assumption that it is a meritocracy based on generating returns. Just 4% of UK fund assets are managed by women. According to one analyst quoted in the report “women live and die by their quarterly numbers … men are cut more slack” (Financial News)

Meanwhile, Morgan Stanley’s female MDs – all 350 of them, 19% of the total – are converging on a summit meeting aimed at improving the pipeline of women MD promotions, and getting more of their number into the top posts (Crains New York)

Every year, 400 Credit Suisse bankers become fathers. From next year, new fathers will get 12 days of paid “daddy leave” (Finews)

An unsettling story of how someone got hired to Goldman Sachs, fired for enticing an NFL star into an insider trading scam, then moved to Hollywood and became a writer for the Simpsons, all on the basis of a Harvard degree which he did not actually get due to serious allegations of misconduct (WSJ)

Inside story from the GAM Absolute Return Bond Fund investigation, which suggests that the whistleblower was Tim Haywood’s partner on the fund, and that the securities which triggered the disagreement had been bought as part of a deal brokered by former CEO David Solo (Finews)

Stacy Bash-Polley, head of Client Relationship Management and Strategy at Goldman Sachs, will be retiring at the end of this year after 24 years at the bank (Reuters)

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As we reported earlier this week, Goldman Sachs is trying hard to build its algo trading business but its electronic trading professionals keep leaving. Now another one’s gone – this time to Google.

Chandan Nath left Goldman this month to become a software engineer at Google in London according to his LinkedIn profile. Nath had been at GS for over eight years. He started as a ‘strat’ in the fixed income division and became an executive director in systematic market making and FX algorithmic trading. Although Goldman is now all about systematic trading, Google was clearly more appealing.

Nath’s exit comes as Google has over 150 jobs to fill in London as it prepares to move into a £1bn London HQ near Kings Cross which will be able to house up to 7,000 staff. Many of Google’s more esoteric jobs in areas like data analysis and cloud computing will be of interest to Goldman’s strats and technology professionals, who number over 9,000 globally.

Goldman Sachs itself is currently trying to fill around 17 engineering jobs in London. However, the firm has shifted many of its more interesting roles to Warsaw, where it’s currently hiring software engineers to work on its Marquee project to make its SecDB pricing and risk database accessible to clients, along with engineers to work on Bolt web, a new pricing platform for derivatives products. As jobs move out of London, more of Goldman’s London engineering and strats team might decide to move to Google.

Nath is the eighth senior exit from Goldman’s algorithmic and electronic trading business in the past few months. Many of the other leavers have gone to work on rival banks’ electronic trading systems. Google poaching talent too is probably a nightmare Goldman could do without.

Goldman strats and engineers who leave for Google might want to bear in mind that some Google staff have complained about the tech giant’s lack of flexibility when it comes to promotions though. – “I’m on the business ladder instead of the engineering ladder and now that I want to swap onto the engineering ladder, I can’t. Engineering pays more at the same level, but because I didn’t come in a software engineer, I’m kind of stuck here,” says one Google employee who wants to move to Goldman Sachs.

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To read some accounts of Andrea Orcel’s time at UBS, you might think it had been an unmitigated success. The Financial Times speaks glowingly of Orcel’s, ‘successful stint turning round UBS’s investment bank.’ The Wall Street Journal notes that he helped streamline an investment bank that had “ballooned” before the financial crisis. Euromoney says Orcel “outperformed expectations” at the Swiss bank. Really?

In one important sense, Orcel did UBS a great service. In 2014, the year in which he took charge of UBS’s investment bank, costs accounted for 99% of revenues, profits were CHF87m and the return on attributed equity was 1.2%. In 2017, profits were CHR1.2bn, costs were 83% of revenues and the return on attributed equity was 13.4%. All hail Andrea.

Or not.

While 2014 was certainly a miserable year as the Swiss bank, the year prior to Orcel’s reign looked better than 2017. Back then, the bank generated CHF2.3bn of profits, a nearly 29% return on attributed equity and had a cost ratio of 73%. On this basis, maybe Orcel wasn’t quite so transformative after all?

What’s less equivocal is that Orcel presided over a transformation of UBS which saw it go from being a bank that ranked second globally in cash equities in the second half of 2014 (according to Coalition) and third globally for futures and options, to a bank whose equities business looked more like an also-ran in the first half of 2018. As banks like J.P. Morgan built market share in equities trading, so banks like Orcel’s UBS seemed to lose it.

Nor were there any great improvements in the M&A division which is Orcel’s specialty. In year-to-date 2018, UBS ranks 10th in EMEA for combined M&A, equity capital markets and debt capital markets activity according to Dealogic, the same as in 2014. During the same period, UBS slipped from 14th to 15th for U.S. M&A, and remained a solid second in Asia. On this basis, Orcel’s reign looks like an exercise in treading water rather than a fiery taking of new ground.

Not that you’d necessarily know it. Orcel – whose London home features (or at least featured) a large picture of someone bearing a strong resemblance to him on one wall – rebranded the investment bank’s overall shrinkage as an achievement. In 2014 he declared that UBS was a “Ferrari” compared to other banks’ “Fiats“: small, fast and focused instead of torpid and all about volume sales. Then, in July 2018, he said UBS was like the Croatian football team that nearly won the World Cup, but didn’t: a small bank, with big dreams and the promise of out-performance. In fact, UBS’s bankers woefully under-performed rivals in the first half of this year.

It wasn’t for want of trying. In April 2018, Orcel mandated that every managing director in UBS’s investment bank needed to have 250 face-to-face client meetings a year, amounting to approximately one every working day. Senior bankers were reportedly up in arms. Nor was UBS’s weakness in U.S. investment banking the desired outcome. – From the start of his reign, Orcel wanted to grow aggressively in the U.S., an intention he reiterated this April with the promise to double the number of client-facing bankers UBS employs in the country.

Part of the problem was that not everyone warmed to Orcel’s approach. “I accept that UBS investment bank and its culture is not for everybody. But if you choose to work here, the expectation is that you are fully committed to the vision, the strategy and the culture,” said Orcel in July. Insiders say Orcel was a divisive figure whom UBS bankers either loved or hated and whose tendency for favourites created unnecessary politics. Morale at the investment bank was allegedly low, and the departure of dealmaker William Vereker in July to work as a Brexit ambassador was a blow. Some of UBS’s long-established bankers simply kept their heads down and tried staying out of his way.

In the circumstances, Orcel’s exit may not be too much of a bad thing. The fact that his replacements include the bank’s global head of equities, Robert Karofsky, and Piero Novelli, a “low-key dealmaker,” looks like a tacit admission that the equities business needs attention and that the investment banking division could do with rather less ego. UBS is presumably still hiring. With Orcel gone, rival banks’ dealmakers may want to give it a look.

Best known for its presence in Europe, Paris-based Rothschild & Co. has heightened its focus on the U.S. market and is adding M&A bankers on both coasts. While the firm is hiring junior and senior bankers, it appears particularly thirsty for managing director-level talent – and is willing to pay for it.

Reporting its first-half results on Tuesday, Rothschild says it plans to double its M&A market share in North America by 2020. The bank has added 26 MDs within the U.S. M&A group since 2013, but eight of those hires were made just this year, with three joining in July alone. “Our system, of 160 active bankers on both the East Coast and the West Coast of the United States, is gradually strengthening, with the annual recruitment of five to ten managing directors in M&A,” Olivier Pécoux, president of the bank’s global financial advisory activities, told France’s Les Echos.

Two of the most recent hires came from UBS; Mike Ostow is now running Rothschild’s financial institutions group out of New York, while Chicago-based Jonathan Herbst was named the head of its technology, media and telecom team. Both were longtime MDs with similar titles at UBS, so they likely didn’t come cheap.

Staff costs across the bank were up 17% globally during the first half, despite just a 12% increase in revenue. Rothschild attributed both upticks to its advisory group, though it didn’t break down specifics for each region. However, the bank made it clear that a large chunk of the compensation pool is being directed toward new MDs in the U.S. Rothschild’s compensation ratio was 62.2% in the first half, but the bank went out of its way to note that number would fall to 61.1% after adjusting for senior M&A hires in the U.S. That may not sound like a big difference, but when you are talking about over $1 billion in revenue and less than 10 hires across six months, it is.

A comp-to-revenue ratio of 62% compares favorably to boutiques like Evercore (60%) rather than large full-service banks, where the ratio tends to land in the low-to-mid 40s. Pay-per-head during the first-half was just under $200k – and that’s including back office and administrative staff (and possibly butlers, at least in London).

While MD hires make all the headlines, Rothschild is adding plenty of juniors in the U.S. as well, according to Jimmy Neissa, the bank’s head of North American operations. He told us back in March that they bring on around 30 recent college graduates in the U.S. every year, though he expects that number to grow going forward. The bank posted seven analyst and associate positions on its internal job site within the past week. Unlike other banks, Rothschild doesn’t target MBAs, so analysts tend to grow into associates.

Similar to what it is doing with MDs, Rothschild appears to pay analysts near the top of the market, providing good reason for the bank’s notoriously low attrition rate. According to Wall Street Oasis, Rothchild analysts in New York can expect a base salary of around $85k plus a bonus of as much as $60k.

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Remember Vladimir Piterbarg? He’s the top London quant who mysteriously disappeared from the Rokos Capital Management a few months ago. He’s just turned up at Natwest Markets as head of quantitative analytics and development.

Insiders say Piterbarg’s arrival was announced internally yesterday. He’s understood to be reporting to Oliver Cooke, who is effectively the COO for Natwest Markets – the sales and trading business of RBS.

Piterbarg is a big catch for the British bank. Prior to joining Rokos in May 2015, he was head of quantitative analytics at Barclays for 10 years. Before that, he spent seven years as co-head of quant research at Bank of America Merrill Lynch.

Piterbarg has a PhD mathematics from the University of California and taught at the University of Chicago Mathematical Finance program for a number of years. Outside of banking quant circles, where he is something of a star, he is best known for authoring several books on interest rate modelling, which now sell for in excess of $100 each.

Natwest Markets has been busy building its sales and trading business in recent years. In July it re-hired Richard Gathercole, an RBS veteran. Last year, when it was still known as RBS, it made around seven major hires in fixed income sales and trading.

Natwest Markets didn’t have a great start to the year. Revenues fell 26% in the first half compared to the same period of 2017. Profits were down 20% over the same period.

After working for PwC in Singapore for six years, Fony Tasani Njauw was keen to improve her technical accounting knowledge and become a chartered accountant. “I decided to take a Master of Professional Accounting (MPA) programme because I was working in the external audit department and the technical requirements were pretty intense,” she says.

Singapore Management University’s (SMU) MPA appealed to her for a number of reasons, not least of which was the fact that it welcomes people who do not already have an accounting degree.

Fony, who did her first degree in business, recalls: “When I first started it was a very steep learning curve, but SMU does a lot to help students who aren’t from an accounting background. We could book the lecturers’ time to go through things we found difficult to understand. The lecturers were always happy to stay and help us. It really motivated us to study more.”

Fony was impressed with the calibre of SMU’s faculty, many of whom were senior industry practitioners. “My corporate tax modules were taught by a tax leader from Deloitte and the lecturer for the audit class was a partner at EY,” she says.

She also enjoyed SMU’s teaching style, which included the use of real case studies to give students a feel for using their new skills in practice. “SMU is unique in terms of its methods of teaching, with lecturers encouraging students to ask questions and debate the issues,” adds Fony. “There was also a lot of group work, where students could share ideas and challenge each other to justify their point of view.”

Fony particularly remembers a module on corporate taxation, in which students were divided into small groups and given the accounts of a real company to work on. “We had to assess the tax structure of the firm and look at its pros and cons, and then put forward recommendations,” she says.

But Fony didn’t just acquire technical skills on the programme; she gained soft skills too. “The various projects we had to do and the discussions we had helped me to be able to articulate my views and ideas. I learned how to work well with other people,” she says.

She adds that these skills have been invaluable to her in the new role she secured as a regional finance manager with the US Embassy after completing her MPA.

Fony says her learning experience at SMU was also enhanced by the diversified professional backgrounds of fellow students. One of her classmates was employed by the Monetary Authority of Singapore, for example, and knew a lot about the technical side of corporate financial reporting. Another student worked for Singapore Exchange and was able to share her experience of working in financial management.

“Everyone was very open to share with each other and help each other. When we worked in a group on a project, we had a lot of different perspectives and ideas. It was very meaningful,” she says.

Another aspect of the programme that attracted Fony was the fact that, alongside its full-time option, it could be taken on a part-time basis, with lectures held in the evenings. Even so, she says students who are juggling full-time work and studying need to be very dedicated. “Time management is important. I sometimes had to wake up early to read the textbooks. At weekends, I had to focus on the group project because that was the only time we could meet up together,” she says.

Yong Ciat, an entrepreneur who is currently studying the MPA part-time, agrees that planning is key to making a success of the degree. But he adds that it’s exciting to be back in university again, and his cohort is a good blend of older students, who bring their experience in the workplace to the course, and young graduates filled with aspirations and energy.

His advice to working professionals thinking of doing the Masters is: “Find a reason why you really want to do this Masters, and remember it. When the going gets tough, go back to that reason. It will get you through. After all, tough times don’t last, tough people do.”

Now that she has graduated, Fony also intends to pursue a qualification in chartered management accounting, as well as gaining charted accountant status. “The SMU MPA programme covers the relevant fundaments for a variety of the certifications for chartered accountants, so you just have to do the professional papers,” she adds.

In fact, SMU MPA is the most recognised graduate qualification in accounting in Singapore, with accreditations from 11 different regulatory, professional and academic bodies, many of which offer exemptions to graduates of the programme.

Fony’s advice to anyone considering doing the SMU MPA programme is to “just go for it”. “It’s a very good programme to build up your technical accounting skills,” she says. “While at the beginning it will be a very steep learning curve, if you put in the effort it’s really worthwhile.”

To learn more about the programme, click here to register for our information session.

Barclays has been accused of working its juniors rather hard of late. In recent weeks, one of its junior bankers (who quit last year) told us it wasn’t unusual for he and his colleagues to arrive in the office and 9am and to work through the night: “At 9am the next day we’d go home, shower, and then come back in again.” It sounds a lot like the infamous “magic roundabout,” which was supposedly stamped out in 2013.

Barclays is supposed to have protections in place to prevent its juniors being squeezed. – Senior bankers are banned from assigning work late on Friday afternoons, for example, and weekends should be protected as far as possible.

If, however, you do happen to be working at the weekend at Barclays as an analyst or associate in the investment banking division, then guess what? A treat may be in store. In a long article on the mind of Jes Staley, Bloomberg says Barclays’ CEO likes to frequent the London office on Saturdays, where he will ‘mingle with the junior bankers putting in extra hours.’

Bloomberg thinks Staley is a nice guy. He’s a, ‘chatty, affable man with a habit of tapping the table when he talks,’ he has ‘nerve and swagger,’ and he doesn’t say things like, ‘customer journey’ (as did his predecessor as CEO at Barclays).

Staley’s easy affability appears in contrast to Andrea Orcel, the outgoing CEO of UBS’s investment bank, who was reportedly known for his 5am starts, midnight phone calls and probing questions (to his bankers) like, “When was the last time you called the CFO?” and “Why did you skip that cocktail party?” Staley is, nonetheless, a banking CEO with a long history of working in finance. Bloomberg says former colleagues describe the Barclays CEO as a demanding taskmaster who doesn’t hesitate to dump anyone who falls short. Juniors who conspicuously work Saturday afternoons should earn plaudits, therefore.

Separately, Edith Cooper, Goldman’s former head of human capital management, who spent many years extolling the virtues of the bank before leaving last year, has taken time to explain why young people today will probably want to work for technology companies instead. Cooper, who is now on the boards of both Slack and Etsy, says technology companies are disruptors whereas Goldman Sachs is in a position to be disrupted. It doesn’t have the same mindset as a tech firm: “It’s not about survival at Goldman Sachs. It’s about continuing to enhance and move forward.”

Cooper says Goldman is also hamstrung by regulation and takes a long time to get anything done. Most damningly, she says it’s run by old people even though 72% of the employees are aged between 22 and 35. Goldman’s new CEO seems conscious of this: David Solomon is famously a DJ and Goldman just opened its own Instagram account to get down with the kids. Even so, Solomon is still 56 years old. Stuart Butterfield, CEO of Slack, is aged 45. Evan Spiegel, CEO of Snap, is just 28.

Meanwhile:

Deutsche Bank says it won’t be merging with Commerzbank. (Reuters)

With six months to go before Brexit, only 630 finance jobs have left the UK. (Reuters)

It’s starting to look like banks will need to make more cuts to their fixed income currencies and commodities divisions. (DealBook)

Emmanuel Macron’s popularity is ebbing in France: “For me it really is a case of a president behaving like a banker.”… “He comes across as a bit of a snob.” (Financial Times)

Yale University stands accused of holding Asian-American applicants to a higher standard than students of other races and of using an illegal quota to cap the number of Asian-American students it admits. (Wall Street Journal)

Could you solve Goldman Sachs’ girls’ coding challenge? (Goldman Sachs)

Slightly more Americans would now feel proud rather than embarrassed to work for Goldman Sachs. (Marketwatch)

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If you have experience with artificial intelligence and machine learning, there’s a decent chance an investment bank will have interest in your background. Firms are building AI applications to streamline trading, research, retail and even wealth management functions with their new fleet of robo-advisors. Yet a thorough mining of banks’ career sites suggests that firms like Goldman Sachs, Morgan Stanley and J.P. Morgan are putting plenty of focus on recruiting AI engineers for surveillance – of both customers and employees.

Goldman Sachs, for example, is looking for multiple AI software engineers – from analysts to executive directors – to join its surveillance analytics group (SAG), which sits in its compliance division. Candidates would build and maintain surveillance systems to spot potential money laundering, but also insider trading and market manipulation – two issues that have haunted banks in recent years. Interest rate manipulation scandals have costs banks billions in fines and have ended the careers of dozens of traders. Despite looking for multiple engineers, SAG is already the largest data consumer team at Goldman Sachs. Current members of the group include professors, research scientists and former traders. Goldman didn’t respond to a request for comment on the new postings.

Of course, using artificial intelligence as part of employee and client surveillance isn’t new. Credit Suisse partnered with CIA-backed Palantir in 2016 as part of a joint venture to better monitor its employees. (Bloomberg recently described Palantir as “an intelligence platform designed for the global War on Terror [that] was weaponized against ordinary Americans at home.) There is also Behavox, a startup founded by former Goldman Sachs research analyst Erkin Adylov that collates and analyses deviations from the norm, like employees accessing data at odd times or even the frequency of their bathroom trips. But now it appears big banks are doing more to build that technology in-house.

J.P. Morgan has been electronically monitoring its employees for eons. Earlier this year, it emerged that the bank also employed Palantir back in 2009, and that it hired a former U.S. Secret Service agent to run a threat group that uses algorithms to monitor the bank’s employees “to protect against perfidious traders and other miscreants.” The bank is currently on the lookout for a cyber security and technology controls analyst with a deep understanding of automation, machine learning and artificial intelligence. “Reporting and governance is also a key part of the role to ensure controls are being measured and monitored,” the posting reads.

JPM just hired Google’s Apoorv Saxena as its new head of artificial intelligence and machine-learning services. Saxena made a key hire from Facebook within two weeks of starting and is actively recruiting to build up his new team. Meanwhile, Morgan Stanley shows several new openings within its financial crimes technology unit, each of which includes machine learning and AI as a desired skill.

Finra recently published a new report on regulator technology, in which it identified five key applications for technologies including AI, natural language processing and big data. The first application on the list was internal surveillance and monitoring of traders, brokers and other employees.

“Market participants have indicated that they are investing significant resources in this area, primarily in tools that seek to utilize cloud computing, big data analytics or AI/machine learning to obtain more accurate alerts and enhance compliance and supervisory staff efficiencies,” the authors wrote. Current investments appear to be centered around human capital, rather than partnering with fintech startups – a trend that isn’t unique to employee surveillance tools. Big banks have begun shunning some vendors as they are bringing much of their technology development in-house.

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If admitting that you have a problem is half of the solution, then Deutsche Bank is doing pretty well. The German bank has placed itself on a strict programme of spending abstinence under CEO Christian Sewing and – even if costs are likely to be slightly higher than expected in the third quarter (implying more energetic cuts in the fourth quarter), it’s still on track to reach its €23bn cost target by the end of this year.

At Credit Suisse, meanwhile, there’s also some restructuring going on. Costs in the markets business are being trimmed to CHF4.8bn (down from CHF6bn in 2014), and maybe even less. Credit Suisse’s equities business is being “reformed” and restructured in the words of CEO Tidjane Thiam, and compliance costs are being squeezed. But what if this isn’t enough?

Today’s note from Deutsche Bank banking analyst Kinner Lakhani and his team suggests it might not be. Credit Suisse is the laggard in terms of investment banks – or at least it was at the end of last year.

As the charts below (from Lakhani et al) reflect, Credit Suisse had one of the worst cost to income ratios and one of the lowest returns on allocated equity among all European banks last year. The only European bank to perform worse than Credit Suisse was RBS (now known as Natwest Markets), which is somewhat of a special case.

Lakhani doesn’t explicitly say so, but the implication is that Credit Suisse might want to take more drastic action.

French banks like BNP Paribas and SocGen or Barclays look a bit better bet by comparison. However, Deutsche’s analysts also stress that European banks as a whole are becoming increasingly marginalized. As the three final charts below show, their market share has never been lower in fixed income trading, equities trading, and in capital markets. The America banks are eating everything.

Cost income ratio by bank, 2017

Cost income ratio from Deutsche

Return on equity by investment bank (allocated equity), 2017

Return on equity investment bank

Deutsche Bank FICC trading market share

Deutsche Bank FICC trading

Deutsche Bank equities trading market share

Deutsche Bank equities trading

Deutsche Bank primary market share

Deutsche Bank primary market share

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So much for making a fortune working for a high frequency trading firm. At the London operation of Sun Trading, the high frequency trading firm purchased by Hudson River in January 2018, pay fell last year. So did revenues. The only things to get bigger were the operating loss and compensation for the best paid manager.

Sun Trading International’s results for the year ending December 2017 show it spending around $5m on wages and pensions for its 24 London staff, an average of $208k per head. One year previously, it paid 26 London staff an average of $233k per head. Tight times.

The pay squeeze was accompanied by a 42% fall in revenues to $23m and a more than tripling of the pre-tax loss to $7m. Even so, none of this prevented Sun Trading International’s highest paid director taking home $663k in salaries and wages, compared to $323k the previous year.

While someone at Sun is clearly doing well amidst the carnage in the firm’s profitability, pay at the firm compares poorly to that at most established hedge funds. Citadel, for example, paid its average London employee $712k last year. The implication is that high speed algorithmic trading alone is not the route to riches.

Of course, Sun Trading might be a special case. However, the high frequency trading sector as a whole has been beset by the dual difficulties of rising costs and falling volatility (leading to falling revenues) and. They were one reason why Hudson acquired Sun Trading in the first place. Hudson and Sun’s has not been the only marriage of convenience in the sector – Virtu also acquired KCG Holdings and DRW Holdings acquired RGM Advisors. High frequency may be becoming a byword for (comparatively) low pay.

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What if junior bankers were to start leaving the more disaffected parts of Deutsche Bank’s European investment banking franchise? Could the bank crumble from the top down and the bottom up? All that would remain be a layer of overworked VPs and directors, desperately trying to meet clients and build pitch books. A version of middle management hell.

Some people in Deutsche Bank seem fearful that this is what’s coming. Their fears have been awakened by another resignation from the Financial Institutions Group (FIG) team which lost all those managing directors (MDs) to rival banks earlier this month. The latest resignation is that of an associate, Pete Mackie. Mackie only joined the FIG team in 2017 after completing an MBA at the London Business School. Now he’s off to work for a different bank (we don’t know which one).

Normally, the resignation of an associate wouldn’t be a big deal, but after at least five other FIG bankers at MD level quit Deutsche in recent months (Claire Brooskby, Christos Tomaras, Kris Triggle, Rainer Polster and the team leader Tadhg Flood), the DB FIG team is feeling a bit fragile.

“We can’t seem to stop people leaving and peers are starting to pick off all our best talent,” says one Deutsche banker. “Adam and Nick need to do something drastic soon – nothing they’ve tried has stopped this outflow yet. It’s very worrying going into year end – we don’t know which juniors we’ll be left with in March,” he adds, referring to EMEA heads of finance Adam Bagshaw and Nick Jansa. It doesn’t help that DB also recently lost Ethan Kok and Nicholas de Vibe, an analyst and associate respectively from its London tech banking team, and Hemant Kapoor an associate on its healthcare team (who went to J.P. Morgan).

Deutsche Bank declined to comment. The German bank is one of the least generous payers at analyst and associate level according to a recent London pay survey. In an attempt to save costs Deutsche recently implemented a ban on juniors traveling to meet clients when managing directors are in attendance too. – This is despite other banks doing their best (or saying they’re doing their best) to get juniors out of the office more.

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I’ve spent a large part of my career in and around the low latency field. It is not uncommon to hear people say “oh but low latency is finished now”, in fact, they’ve been saying that since at least 2008, but is it really?

What exactly is Low Latency?

Latency in trading is the time it takes between deciding to execute a transaction and that transaction reaching the market. Thus, in a low latency environment, you are striving to minimize the time lost in non-business functions, whether by transmitting your transactions over long distances or through inefficient internal data handling. Anything that adds to the “tick to trade” cycle, the time it takes from a price update (tick) to be disseminated from a trading venue to the time the same venue receives your order needs to be understood and justified.

Why is Low Latency (so) interesting?

Low latency trading is ever-changing. While the challenge has not changed over the years (that is, to be faster than the pack), what was once innovative and differentiating is now passé. Where once you could make money by (simply) being fast, that luxury now only applies to the few who have the tenacity and budget to push the limits to the extreme. But if “raw” low latency is no longer so attractive, it means that the second wavefront, where the “pack” are concentrated, is still competitive and ripe for innovation.

In this age of AI, big data and cloud, new trading styles are emerging. Once upon a time mentioning “cloud” in a low-latency conversation would have got you laughed out of the building, but cloud trading services are becoming viable, and as they mature their latency profile will become a point of contention. Add to this the forthcoming 5G rollout, which aims to deliver high-speed, high-bandwidth mobile communications, it won’t immediately compete with fixed trading links, of course, but it opens new avenues of innovation and could perhaps herald a secondary (or is it tertiary) low latency boom.

I want a job in low latency technology too! What are the key skills?

Whichever of the many roles within a low-latency team you desire, you need to be a passionate technologist and a creative thinker. A degree of obsessiveness will help too.

For developers, a strong background in a low-level language, often C++, is expected, but fluency in multiple programming languages will be an advantage for those working with the traders and quants who may well be modelling in Python, Julia, R or other higher level languages. On the other side of the software layer, an intimate understanding of the hardware and operating system on which you are running is essential. GPUs and FPGAs are increasingly common in a heterogeneous trading system and understanding when and when not to use them is at least as important as knowing how. For ops and engineering, tuning the operating system to ensure the best performance (and least interruption) is imperative. Likewise, network engineers need to dive deep into their network, while also managing relationships with connectivity and hosting providers and evaluating new opportunities. In all areas, be an expert in what you have and keep an eye out for new networking technologies that may give a much-needed advantage. Consider the rebirth of microwave and more recently shortwave to see evidence of this.

In summary, if you are a passionate technologist with an eye for low-level detail, low-latency remains an exciting space to build a career!

Neil Horlock spent 20 years at Credit Suisse, most recently as a global architect for exchange connectivity within markets IT.

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I’m a senior developer in Hong Kong and have spent the past 12 years working for several global banks in the city. Late last year I was getting bored in my role working on trading systems at a US bank and I started looking around for something new. I eventually moved on (to another US bank in 2017) but not before I’d received a job offer from…a crypto hedge fund.

The technical side of the crypto job was great because it involved designing a platform from scratch. Greenfield tech work is always more interesting, in my opinion. While I’ve been working on pretty leading-edge equity systems for the last few years in banking, all these platforms were already built before I started.

I turned down the crypto developer role not because I thought working in a controversial sector like crypto would tarnish my CV (I could have easily got back into banking) but because the firm was offering me less money. In Hong Kong, it’s easy for good developers to move between banks and pick up a pay rise of at least 15% (I got 20% last year), so shifting roles even on the same salary is practically unheard of.

The crypto fund made vague promises about large future bonuses, but not even being able to match my salary was a deal breaker for me (I’m in my 30s now and am getting more risk adverse).

I will say, however, that I was impressed with the ‘relaxed’ culture of the company, which I picked up on even in the way the interview process was structured.

When big banks hire developers, they typically get you to do several complicated time-limited coding tests in their office or online. In both cases you are supervised by a senior developer and might have less than an hour to solve a problem, so the whole process is pressurised and unpleasant.

The crypto hedge fund gave me four days to come up with a coding solution at home, and the problem I was given was easy. I had to write a program that could connect to an exchange, and then get market data, manipulate it, and send buy and sell orders. It was pretty simple logic for an experienced developer like me and I was under virtually no time constraints.

From a tech perspective, the crypto firm did this to find out whether or not I could write nice, clean code without any distractions. But the interviewers also didn’t heap pressure on me because they wanted to come across as unthreatening – they wanted me to like them to increase the chances of me accepting a job offer.

Crypto funds (like all startups) don’t have large hiring budgets like banks do, so they can’t afford to stress out candidates during the hiring process. They have to play their trump card: ‘working here is more relaxed, so you’ll enjoy it more’. The firm also took a short time to make a hiring decision and only did one coding test. Again, that’s because it can’t afford to be as fussy as a bank if it’s not paying as much.

I wouldn’t completely rule out joining a crypto hedge fund in the future if the sector takes off, but I think developers like me generally need a strong push factor to leave a bank (e.g. you hate your job or it’s under threat of redundancy) to make this move at the moment.

Astrid Fong (not her real name) has been a Hong Kong-based developer for 12 years and currently works for a US bank, which she joined in 2017.

Image credit: egal, Getty

While many people still love the idea of working for a hedge fund, the industry has lost a bit of panache in recent years as dozens of big-name firms have closed their doors due to poor performance. However, many quant funds that rely more on algorithms than human traders seem to be doing just fine. One possible reason is that they are offering huge pay packages to poach blue-chip junior talent away from investment banks and tech firms.

Hedge fund giant Citadel, which runs multiple strategies but has been actively building up its quant team, is now paying its junior tech staff more than $130k, according to Financial News. That dwarfs the compensation packages of top investment banks and tech firms, where analyst pay tops out at around $90k. “This is what all the tech interns are talking about,” one junior told the media outlet. Indeed, a quick look at Glassdoor shows that software engineers at Citadel can make around $140k. The average salary for quant research analysts is over $180k.

Hedge funds like Citadel can justify such comp packages because they aren’t hiring fresh graduates as back-office staff. Junior quants may not be making trades directly, but the software and algorithms they develop can help bring in millions. Citadel returned nearly 9% during the first half of the year, well surpassing the hedge fund industry average of 1.2%.

Of course, banks hire quants and strats too, but they don’t have the freedom to pay juniors at that level. Pure quant funds have been using investment banks as their own personal recruiting pool all year. Millennium Management, for example, has hired at least three lifelong sell-side quants in the last two months alone.

Elsewhere, Facebook continues to make headlines for all the wrong reasons, showing what can happen to tech startup culture when companies make it big. First, the two co-founders of Instagram quit, with insiders citing a clash with Facebook executives over strategy. Then, Brian Acton, co-founder of fellow acquisition WhatsApp who left $850 million on the table by quitting Facebook before his earn-out, went scorched earth on the social network in an interview with Forbes, citing Facebook’s leadership and its monetization efforts as the reason for leaving early. Facebook executive David Marcus responded on Wednesday in a blog post first reported by Bloomberg, calling Acton’s decision to go public with his thoughts “low-class.”

As part of his response, Marcus provided a window into what can happen to work culture when startups like Facebook become big corporations.

“WhatsApp founders requested a completely different office layout when their team moved on campus,” Marcus wrote. “Much larger desks and personal space, a policy of not speaking out loud in the space, and conference rooms made unavailable to fellow Facebookers nearby. This irritated people at Facebook, but Mark [Zuckerberg] personally supported and defended it.” The narrative around working at Facebook has gone from ping pong and beanbag chairs to clashes over politics and conference room usage.

Meanwhile:

Boutique investment bank Perella Weinberg has hired Goldman Sachs and J.P. Morgan as bookrunners to work on a potential initial public offering that could value the New York firm at roughly $1.5 billion. Interestingly, the boutique decided against included Morgan Stanley, where Joe Perella and Peter Weinberg cut their teeth. (Bloomberg)

The SEC has accused Tesla founder Elon Musk of misleading investors with his now-infamous tweet that he had secured funding to take the automaker private. The lawsuit is seeking unspecified monetary penalties as well as an order that Musk can’t serve as an officer or director of a public company. Tesla shares were down 11% as of late Thursday afternoon. (Bloomberg)

Investment bankers at UBS are showing mixed emotions as they say farewell to their boss, Andrea Orcel, who is leaving to become the chief executive of Banco Santander. “He’s the best banker I’ve ever worked with and the worst manager I’ve ever seen,” said one UBS banker. Ermotti has a legendary work ethic and expects to see the same from those working underneath him. You can read Orcel’s farewell letter to employees here. (FT)

Despite his background, Orcel won’t be making radical changes to Banco Santander’s M&A group. His first focus will be to upgrade the bank’s retail banking operations. (FN)

A former Morgan Stanley trader who used a fake hedge fund to bilk $22 million from friends and family, including his own mother, has been sentenced to eight years in prison. Michael Scronic blamed his gambling addiction as the root cause for his behavior. (Bloomberg)

Goldman Sachs officially has a retail presence in the U.K. The firm launched its web-based consumer bank, Marcus, which has grown to $23b in deposits in just two years of operation in the U.S. (WSJ)

Goldman Sachs credit trader Shawn Joshi has left the firm to join Morgan Stanley to head up its index trading desk. He’s just the latest trader to move on from Goldman since David Solomon was named incoming CEO. (Business Insider).

Follow @BeecherTuttle

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If the pundits are to be believed, Paris is suddenly ahead of Frankfurt when it comes to finance job transfers out of London because of Brexit. Sia Partners, a management consulting firm which is tracking Brexit-related job transfers, says over 2,800 finance jobs are being transferred to Paris compared with 1,940 which are going to Frankfurt, 903 which are going to Dublin, and just 350 which are going to Amsterdam. Paris is popular.

However, French bankers say Brexit is far from their only reason for leaving London. While young French graduates continue to be attracted to the City and see it as an ideal place to start their careers, more senior bankers are leaving London well before Brexit happens. Their reasons are, “professional, pecuniary, family-related and down to quality of life,” says one former J.P. Morgan banker who now runs a Paris fintech firm.

One returnee cites the falling pound as a reason for his return. “It was a purely financial calculation linked to the cost of living in London and the change in the value of the euro and the pound,” he says. When combined with a new flat 30% tax rate on capital gains, and what Denis Marcadet, president of headhunting firm Vendomes Associes describes as Brexit-related pay inflation, Paris is a lot more attractive than it used to be.

Paris is also seen as a kinder, gentler sort of place than London. One young French banker who quit the City says the British capital is a place of extremes: “It’s full of talented people who make huge sacrifices in their personal lives in order to progress.” While this might be acceptable when you’re young and child-free, things change with children. The cost of schools in London doesn’t help. “French bankers in London fear that school fees for their children are going to explode,” says the head of one Parisian headhunting firm. “This is why you most often get people moving back when they’re senior associates,” says a banker in Paris.

Of course, Brexit isn’t to be dismissed altogether. The French community is already awash with tales – possibly apocryphal – of people in London being given 24 hours to decide whether to move ‘home’ or not. Those who do are reportedly hedging their bets by schooling their children in international schools where they can continue to learn English in case of a return to London in future. One thing is certain though: French bankers in London have no intention of moving to Frankfurt. If French bankers move anywhere, it will be Paris, says the ex-J.P. Morgan banker. Frankfurt is seen as second rate both in terms of culture and infrastructure, he adds.

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Banking has always been a marathon rather than a sprint, but now it’s becoming more of a Marathon des Sables than a pound across the pavements. For all the efforts to curtail them, working hours in finance are still long and competition for senior jobs has become brutally cut-throat.

So, how do you avoid burning out before you’ve even been in the industry for a decade? We asked a selection of investment banking division (IBD) and markets professionals about their techniques for managing the workload and the politics. This is what they said.

Fake it but deliver. – Director, M&A

“Carry a notebook around with you at all times, it makes you look busy. It can also help to talk in management speak so that you seem to be ‘aligned’ with the company but are in fact so annoying that people avoid distracting you with conversation.

“Make sure you do one really big deal a year. That way you’ll be left alone. Also, get become an expert on your particular sector. This will make your work much easier and will dissuade people from giving you additional work for fear that your superior knowledge will show them up.”

Seek professional help. – Head of trading division

“Some years ago I found myself in a situation where I had been going at 105% for too long. I was standing on a burning platform and I had to do something about it. I engaged a leadership coach for a year and a half and now I think I’m balancing the challenge of work and life a lot better. I try to delegate, to manage my time more carefully, and to avoid the trap of delivering above expectations at all times.”

Use support staff, lower your standards, work hard at the start. – Associate, M&A

“These days, most banks have support teams in Mumbai. Make the most of them and delegate as much as you can to the presentation support team. It also helps if you stop caring too much about the unimportant things like footnotes which won’t really have any impact on the presentation. Avoid getting into too much detailed analysis, which won’t really be appreciated.

Work hard and build a good reputation early in your career so that people like and trust you. That way, you’ll have the flexibility to choose the deals and pitches you work on. Finally, try to build some boundaries between work and life outside work. It can help to communicate in advance that you have plans for Thursday, or are travelling at the weekend.”

Do one thing at a time, automate as much as possible, be strict about your outside interests. – Executive director, quantitative group

“I think a lot of time is wasted switching between different tasks with different context. For this reason, I try to prioritise tasks and to structure my day so that I’m not distracted and make the best use of my time. I’m also a big believer in automation – why press a button 10 times when you could talk to someone in technology and only press it once? And I’m protective of my outside interests. At the moment I’m taking classes in a second language. It’s useful for me when I go on holiday, gets me out of the finance bubble and it looks good on a CV!”

Find an employer that’s sympathetic to your needs, try not to care too much. – Director, private equity

“There’s not much way you can escape the culture at big banks. You’re expected to stay in the office until 10pm and there’s not much way around that. I found that the key is to go and work for small independent companies. The pay is often less good, but they will often judge you on what you deliver rather than the time you spend in the office.

“The only other thing I can suggest is attitude. If you don’t care too much and don’t take it too seriously, you’ll handle the requirements of this profession much better.”

Don’t be greedy, don’t be egotistical, take it as it comes. – Managing director, strategy

“Too many people take this industry all too seriously. They get greedy and greed turns to fear and jealousy and then they’re sucked in and stuck because of the money. You need to take a step back, to quietly carve out your niche and to watch it all go by, without inflating your ego and obsessing about your bank balance.”

Don’t over-promise. – Analyst, sales and trading

“You should almost never give the earliest date by which you may be able to complete something. Yes, you may very well be capable of completing the work in that time but all you need is for something to sideswipe you and suddenly a bad day turns into a bad week and a bad week sometimes even turns into a bad month if delays start compounding into other work. Remember: if you promise delivery by Wednesday and deliver Thursday, you have under delivered, but if you promise delivery Friday and deliver on Thursday you’ve over-delivered. Managing expectations is crucial.”

Photo credit: Getty

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It’s one of the only situations in life where the correct thing to do may be to tell a white lie. Unless the hiring company is willing to meet with you off the clock, you’ll likely need to spin a tale to sneak away from work for a job interview.

In some situations, it’s not overly difficult. You tell your boss you have an appointment and will be a few hours late. But in other instances, particularly for juniors in banking who are tied to their desk, one may feel compelled to offer more details. This is especially true if you’re actively looking for a new job and likely need multiple stays away from the office. The best advice: keep the narrative as simple as possible. It’s more about what you don’t say than what you do.

Doing it right

The easiest, most professional way to get out of work for an interview is to not have to do it at all. Inquire if a hiring manager can meet you before or after typical work hours. Even if they say no, they won’t be taken aback by the request. If anything, it will make you look like a responsible employee.

If the interview must happen during work, you may want to consider taking a vacation day. Then there is no excuse needed and you won’t have to worry about timing or what to do with your interview clothes if they are different than what you’d wear to work.

“You don’t want to be worrying about annoying a supervisor with a last-minute excuse and having that distraction when you are going on an interview,” said Alyssa Gelbard, the president of career consultant Point Road Group. “A vacation day also gives you the luxury of not having to worry about rushing back to the office.”

If that’s not an option, ask for an early morning or late afternoon interview time. Your absence won’t be noticed as much, and you won’t need to concern yourself with the “before” and the “after” fallout at your current office.

As for excuses, it’s best to be as vague as possible. “I have an appointment” works 90% of the time. Often there is no need to go into more detail and, quite literally, you aren’t fibbing. If you feel you need to provide more, stick with the standard doctor appointment or dentist appointment, meeting with your tax professional or having a maintenance issue at your house. Try to work from home that day if at all possible.

What not to do

Bad news involving a family member

Resist the urge to say you have a family emergency, particularly if you are close to your boss, who may ask for more details. Not only are you involving a second person, but you’ve stretched an excuse into an emotionally manipulative lie. And never say you’ve had a death in the family.

“If additional questions are asked, likely when colleagues want to be supportive because of your loss, your lie will be forced to grow and that is never a good thing – ever,” Gelbard said.

People can understand if it comes to light that a “dentist appointment” was, in actuality, an interview. But an excuse like: “my son was in a car accident” is tough to look past. Even if you get the job, you risk burning bridges. Saying you have a client meeting can portend similar outcomes where you’re involving a second person unwittingly. Plus, your boss is well within their rights to tell you to push it off.

Anything that can quickly be remedied

You say that something small and inconvenient came up, like a flat tire or your nanny didn’t show, and you’ll be a few hours late. What if someone from the office can help in that situation? Larger financial firms often have backup daycare to guard against their employees missing work due to issues with their children. Some firms even offer concierge services. Know your employer’s policies.

Excuses that insinuate irresponsibility

A common pitfall: You’re so worried about providing a believable excuse, you choose one that makes you look bad. There is no need to “forget” something or be late without your boss knowing ahead of time.

One that doesn’t give you enough time

If an interview is going well, sometimes a one-hour conversation can quickly become a three-hour marathon with multiple people. The last thing you want to do while trying to make a good impression is telling someone you need to walk away. Give yourself plenty of time.

In short, try not to use an excuse that won’t enable you to give advanced notice. You’re less likely to get caught in a lie, burn a bridge or miss the interview if you are not able to extract yourself from the office.

Follow @BeecherTuttle

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As well as being fascinating in themselves, reports from the latest round of LIBOR trials are a real reminder of how good things used to be at Germany’s national champion, not so long ago. For the last two years, according to their remuneration report, nobody at Deutsche’s investment bank has earned more than €8m. Even in 2015, there were only three individuals as this level, and we can be pretty sure that the deferral will be substantial. But back in 2009, things were very different; a middle ranking rates derivatives trader was taking home US$9m, or as Bloomberg helpfully calculated, $24,000 a day.

The bonus has come up as a key element in the current trial. Matthew Connolly and Gavin Black are the two former Deutsche employees who are on trial in the USA, and Tim Parietti was one of Connolly’s direct reports, who has pleaded guilty to the same offence and has agreed to testify against his former colleagues. But … the defence lawyers have noticed that Parietti’s testimony on behalf of the government refers to his being ordered to share his trading position with the LIBOR submitters between 2006 and 2010. Which is strange as the plea bargain agreement that he struck with the judge only mentions the years 2006 to 2008.

This is … potentially financially convenient, as part of the penalty for admitted LIBOR fraud is that you have to give back your ill-gotten profits. So if, for example, you had been awarded a $9m bonus in 2010 for work performance during 2009, you might be pretty keen to establish that this was a period in which you weren’t admitting to any wrongdoing. The defence’s argument is that since this prosecution turns on quite specific details of who said what and how far the envelope was pushed, it isn’t a great look for the government case to depend on someone who says one thing in one venue and another thing in another, particularly when he has a pretty massive financial motive to do so.

Deutsche Bank isn’t a direct party to this trial – they made their settlement a couple of years ago. But they are probably looking back on this episode ruefully. The year 2009 was a massive revenue year for Deutsche, particularly in their (at the time) market leading rates & forex franchise. In the immediate aftermath of the crisis, dealing spreads in rates products widened substantially, and market share concentrated significantly as clients preferred to deal only with the biggest players, and even within that group tended to gravitate toward too-big-to-fail banks as their preferred counterparties. If you were trading FICC products at Deutsche back then, you could hardly fail to make money, even if you weren’t cheating.

The 2009 experience had strategic repercussions that lasted for most of the following decade. Deutsche’s apparent quick return from the crisis (and lack of need for public sector bailout) convinced the bank’s top management that they were going to be one of the last players standing, and that the FICC-driven, balance sheet heavy approach to sales & trading was their key competitive advantage. The quick return to profitability was one of the factors behind the consolidation of Anshu Jain as the natural successor to Josef Ackermann.

And of course, it was a mirage. The year that Tim Parietti got his $9m was unrepeatable – the following year, Deutsche’s profits halved. The company has needed to radically cut costs and leverage and downsize its trading operations. No wonder banks defer compensation and claw it back these days.

A demonstration of how quickly things can change was given by Tidjane Thiam yesterday. At a conference, the Credit Suisse CEO said that “You can feel the nervousness across markets”, and that trade tensions associated with the US administration’s rhetoric and behaviour meant that every piece of news was knocking market sentiment, particularly in the emerging markets.

But … it was only last week that Thiam was “calm” about the prospect. “I never really worry about emerging markets”, he said, adding that emerging markets are fine as long as they are well-managed. So he is simultaneously calm and worried? Or he can feel the nervousness in markets while maintaining Zen-like detachment himself? Or possibly, Thiam has enough common sense to be able to read a chart on a terminal, so he knows that times are good, but he is so utterly committed to a “wealth generation in Asia” thesis that there is no way to back away from it, so he might as well put a brave face on it. It’s perhaps just as well that his stock management headshot has such an ambiguous facial expression that it can be used just as well for “nervous” as “calm” stories.

Meanwhile…

Arki Busson’s LumX (the former Gottex) has filed its interim report and things are not pretty; more mandate losses and now half the company’s earnings are attributable to two contracts. Although the chairman’s statement says “I am encouraged by the growth prospects”, going concern status is going to be dependent on shareholder support if some more revenue doesn’t show up. (Financial News)

The UK’s immigration policy post-Brexit will be based on employer sponsorship of “high-skilled” (high earning) employees, but also of their families. Are banks going to be willing or able to sponsor the families of their expat staff in London? (Telegraph)

And on a related note, the City Minister has been addressing meetings at the Conservative Party conference, saying that the financial sector needs its own “friction free” immigration regime. (Financial News)

Blood is thicker than water – three brothers are on trial in Paris for money laundering. One is a former director of HSBC in Geneva and one used to run a wealth management firm. Their defence – that they believed the money came from tax evasion rather than drugs – is novel. (Bloomberg)

“Bitcoin Suisse”, a crypto financial services provider, has hired Lothar Cerjak from the better-known Credit Suisse, to be its “Head of ICOs” (Finews)

Yann Gerardin, head of CIB at BNP Paribas, has been promoted to deputy COO (FT)

Natixis’ new CEO is reiterating the bank’s “multi-boutique” strategy of building its network by taking financial stakes in M&A and asset management boutiques – current acquisition priorities are in Asia and in private debt (FT)

From the “dull but worthy” department – the succession race for the chair of the Financial Stability Board, the world’s top regulator, is down to two – Randall Quarles of the Fed and Klaas Knot of the Dutch central bank. An appointment from the USA might both temper the “America first” philosophy of the US administration and bring some of the de-regulatory domestic agenda to the international stage. (Bloomberg)

Deutsche Bank’s investment banking strategic revamp is beginning to show some details … unfortunately, they are such old familiars as “reorganise product groups round client sectors” and “try to demonstrate the benefits of a one stop shop”. If you can’t do something new, do something different, maybe (Handelsblatt)

Kevin Hassett, a Trump administration advisor, has accused Goldman Sachs of slanting its economic research in order to deliver benefits to the Democratic Party in the forthcoming elections (CNN)

A new “Diversity In Finance” initiative is to be launched this month with 200 founder organisations including JPM, Citi and Fidelity (Bloomberg)

David Solomon says that the best thing about being a DJ is that it gives his employees something to make small talk to him about. Also gives profile-writers something to say … (Business Insider)

An interview with Howard Marks on the state of the cycle, with cautious comments about distressed debt (Axios)

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Edward Eisler is nothing if not consistent. In 2016, he paid employees working in the London office of his eponymous hedge fund an average of £436k each, excluding social security costs. In 2017, he paid them an average of £437k. More than just coincidence?

Eisler’s careful handle on compensation comes after the firm went on a hiring spree in 2017 that was perpetuated in 2018. It also follows a substantial drop in margins at the fund as administrative costs went through the roof.

In the year ending December 2017, accounts for Eisler Capital (UK) show the fund doubled its headcount from 13 to 26 people. Last year’s recruits included Eleanor Franchitti, the former head of European investor relations at Bluecrest Capital Management and Filippo Fiori from Credit Suisse. In 2018, Eisler has gone all out to raid Deutsche Bank, recruiting former protégé and ex-Deutsche head of macro trading Sam Wisnia in March, followed by Angelo Haritsis, the ex-Goldman Sachs MD who had been leading Deutsche’s fixed income strats function, and his team of seven key DB strats in June.

The Deutsche Bank hires have yet to appear in Eisler’s accounts, but it seems likely that the fund will pay an average of circa £437k for 2018 too.

All this hiring is taking its toll on profitability. In 2017, revenues at Eisler Capital increased 46% to £24m, but profits fell 25% to £5.3m as administrative expenses more than doubled. The fund attributed part of this increase to its investment in “technology systems’ and “quantitative infrastructure.”

While Eisler seems determined to keep staff compensation steady, he has more than doubled his own pay. As the only director, Eisler paid himself a salary of £407k in 2017 (up from £184k in 2016). He was also the likely recipient of the £3.99m paid by the fund in dividends for 2017, whereas in 2016 the dividend amounted to nothing at all.

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If you’re a technologist who aspires to leave Goldman Sachs and work for Google, you might be interested to know that you don’t necessarily have to be a software engineer at the technology firm: Google is also hiring ex-Goldman people for sales jobs.

Yinka Fasawe is a case in point. The ex-Goldman Sachs technology analyst has just joined Google’s London office as a ‘customer engineer’ for Google Cloud, working with financial services clients. Google’s customer engineers help inform Google’s clients on how to use the company’s products to achieve faster growth. In Fasawe’s case, he seems to be steering banks towards greater use of Google Cloud.

Google already boasts HSBC and Charles Schwab as clients for its cloud services and is keen to sell its ability to offer machine learning products and data solutions to banking clients. For this reason, Fasawe could yet find himself at the forefront of banks’ use of artificial intelligence. At Goldman Sachs he was working on the fixed income currencies and commodities (FICC) technology team.

As we reported last week, Goldman also recently lost one of its systematic trading ‘strats’ to Google. Chandan Nath left Goldman after eight and a half years to become a Google software engineer. Google has around 150 jobs to fill in London as it prepares to move into a £1bn London HQ near Kings Cross which will be able to house up to 7,000 staff.

A move to Google may not be for everyone though. Some Google employees are attempting to escape in order to work in banking after being frustrated by the technology company’s complex ‘ladders’ promotion system.

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