Morning Coffee: Banking job cuts begin as deals wane. The juniors still getting new pay rises
In the City of London, bankers are sitting in pubs and pontificating to journalists. "There’s been a major slowdown. You basically have people watching the images on the TV and not wanting to put their money anywhere,” one 26 year-old asset management employee informed the Times while buying a round of beers. “After the time we had last year, it’s kind of a relief taking it a bit more chilled,” a trader basking in the sun outside a pub declared. 100 hour weeks are over; 80 hour weeks are again the norm.
Not everyone, however, is having such a fine time. With equity capital markets (ECM) deals down around 70% this year compared to last and the UK IPO market having its worst start to the year since 2009, banks are starting to make tough decisions. The job cuts that have seemed inevitable for the past few weeks are starting to appear. UBS has become the first to act.
After reviewing its capital markets operations, Bloomberg reports that UBS has made cuts to its ECM bankers in Europe the Middle East and Africa. No names are given, and the cuts have reportedly only impacted "a handful" of staff, but still. More layoffs appear to be in the pipeline - UBS's bankers in Dubai and Poland are reportedly being trimmed, too. Bloomberg suggests the cuts could indicate the end of the war for talent.
If markets remain closed, it's a question of if and not when other banks follow UBS's lead. M&A bankers are still busy executing deals they'd already begun and marketing for new deals, but ECM bankers are at the sharp end of the slowdown. “IPOs are dead. Let’s make no bones about it," one London banker tells the Times. “I went into this year expecting us to be down maybe 25% on last year’s bonanza year. What actually happened was a complete collapse,” says the head of ECM at a U.S. bank. "It is strange. So very strange."
Separately, if the war for talent is turning into a ceasefire, Lazard hasn't got the message. Having raised salaries last August, Business Insider reports that Lazard is raising them again, although increases being announced now won't take effect until July 2022.
The pay rises are only going to Lazard juniors. From July, first year analyst salaries at Lazard will be $120k, up from $100k. Second year analysts at Lazard will get $125k instead of $110k. The increases put pay for juniors at Lazard on a par with pay for juniors at Goldman Sachs. While they're likely to be welcomed by 20-something Lazard trainees, they could yet be a double-edged sword: in a declining market, high salaries mean high fixed costs and costs may need to be cut.
If IPOs are to resume, stock markets will need to stop swinging wildly. But stock markets are swinging wildly because of fears about inflation and interest rate rises, the Ukraine war, and concerns about resurgent COVID. (WSJ)
Deutsche Bank fired some of its most senior U.S. equity capital markets bankers after they made a trip to a strip club and tried to pass it off as a standard expense. No clients were said to be involved. (Bloomberg)
It's not easy being a Russian oligarch with a duplex in St. James's and an art-filled mansion in a commuter suburb, and having your assets frozen. "We have to somehow start a new life... Will l be allowed to have a cleaner, or a driver? I don’t drive a car . . . maybe my stepdaughter will drive. We don’t understand how to survive.” (Financial Times)
Russian bankers are having to reinvent themselves. One is becoming a dealer in classic cars. A recruiter says he's had an influx of calls, including one from a Russian private banker whose livelihood disappeared overnight. (Bloomberg)
Shanghai has locked down its financial district for four days. (Financial Times)
Former U.S. treasury secretary and ex-Goldman Sachs banker Steve Mnuchin raised $2.5bn for a new private equity fund 'Liberty Strategic Capital.' Mnuchin's investors include the sovereign wealth funds of countries he visited while in government. (New York Times)
Morgan Stanley is accused of tipping-off hedge funds about big block trades that could move markets. Other banks may have done the same, and private equity firms have long been alert to the dangers. - KKR only partners with one bank in the sale process for this very reason: it wants to reduce the number of banks with knowledge of an imminent deal. (Bloomberg)
79 year-old David "Bondo" Bonderman shaped the culture at private equity firm TPG. “He's an iconic deal guy -- he'd get on a plane over 200 days circumnavigating the globe to chase deals and meet management teams.” It probably helped that he had his own jet, which came equipped with a French boudoir. (Bloomberg)
Deutsche Bank CFO James von Moltke is becoming deputy chief executive. (Reuters)
HSBC has not pulled out of Russia and is studiously avoiding calling events in Ukraine a war in its research reports. (Financial Times)
Black women are rated as less professional when wearing dreadlocks or Afros than white women or Black women wearing straightened hair. (Business Insider)
I let a baby bird nest in my hair. (Guardian)
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