Morning Coffee: Goldman Sachs’ top M&A bankers can expect some fine bonuses. Hong Kong bankers forgot how to do IPOs properly

As the saying goes, it’s very much not how you start, it’s how you finish.  After a fairly lousy first half of the year, Goldman Sachs' M&A bankers are heading into compensation committee season all guns blazing.  Not only do they have a strong third and fourth quarter of revenue and an excellent pipeline, but they can see signs that the long awaited financial sponsors deal boom is about to kick off. Speaking at an industry conference yesterday, Goldman CFO Denis Coleman duly declared that 2026 could be “the second-biggest year in history”.

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Banks like Citi and Morgan Stanley are also doing well, so there will be competition in the labour market. Which all means that the bankers will be able to make a strong case that they ought to be paid on the basis of what they’re about to deliver, not what they’ve actually done in fiscal 2025. The Johnson Associates compensation projections from November might therefore be out of date, in so far as they only had M&A advisory bonuses forecast to be 10-15% up on last year, compared to equity sales and trading at 15-25% up.

It might be the occasion for some eye-rolling on the part of heads of equities, who always seem to come off worst in these kinds of negotiations.  In bad years, trading bonus pools get cut along with revenues; in good years they are expected to make a contribution to preserving franchises elsewhere in the bank. 

So the game plan for traders at the compensation committee will be to emphasise that after enjoying a 48% gain this year, Goldman Sachs shareholders need to be making their contribution to the employees’ wealth.   Although investors don’t seem to have taken news of rising costs very well when it came from JPMorgan, they have to recognise that it’s a people business and that, as Denis Coleman makes clear, the compensation landscape is “competitive” for good dealmakers. 

Coleman helpfully said yesterday that, "Our philosophy is to continue to be a pay-for-performance organization, and we want to make sure that we're in a position to pay very competitively, particularly for our very best people” and that “As long as the markets are as ebullient as they are and with optimism on the outlook, that'll continue to be a focus."

Elsewhere, Hong Kong equity capital markets (ECM) bankers are in trouble with the authorities for sloppy work on IPOs.  That isn’t to say that they've been less than diligent in landing deals, pricing or selling them; far from it.  But the actual paperwork has apparently been well below standard, with “poor drafting quality of listing documents” and “failures to address regulatory comments” among the issues raised by the regulators in a letter to IPO sponsors this week.

Part of the problem appears to be that the IPO bankers are simply overworked by the surge in listing applications and the “unusually heavy case-loads” that have resulted.  The regulators note that it’s been hard to get hold of personnel, and that in some cases, inexperienced bankers have been put in charge of deals without necessarily having enough experience of the requirements.  There’s also been a lot of cutting and pasting in documents, leading to poorly drafted descriptions of business models and excessively long summary sections.

This is also likely to be a consequence of the last few years of deal drought, as much as the current rush. From 2022 to 2024, the labour market for Hong Kong bankers was absolutely terrible; even in March this year, bankers were taking 40% pay cuts on moving from international banks to mainland Chinese firms, and considering themselves lucky to still be in the market.  Many professionals will have left the industry, and many who stayed will have found their skills going rusty during the years when the telephone grew dusty. 

Now everyone is understaffed and trying to keep up.  That means that errors will inevitably be made, and it might not make for the best working conditions.  But at least it ought to mean that employers also have to pay up for the small remaining supply of people who are capable of getting a Hong Kong deal to market without making any mistakes along the way.

Meanwhile …

HSBC has had a bit of a poaching problem in its Middle East operations, as competitors have taken advantage of the uncertainty surrounding its strategic restructuring.  However, that very restructuring has left it with spare capacity in London to replenish the ranks; MDs Robin Brown, Ajay D’Souza, Simran Saggu and Khurram Islam have all relocated to the Gulf. (Bloomberg)

More examples of the tech industry reproducing the working practices of finance; according to sources at the economics team of OpenAI, they are increasingly feeling under pressure to produce research which supports the company’s interests. (WIRED) 

Trafigura profits are only down 3% from last year’s record levels, which is good news for the comparatively small number of employees they get shared between. (Bloomberg)

“I work at a hedge fund, bro”.  Shahin Ahmed is certainly not the only person to exaggerate their role in finance, but he seems like a somewhat extreme case; despite being only an administrative assistant and driver, he managed to convince three investors to let them manage their portfolios, according to an SEC civil court action. (Investment News)

Apparently the staff cuts and voluntary redundancies at the Bank of England are being made in order to finance unspecified “technology investments” in the inflation forecasting systems, some of which are 20 or 30 years old.   (Bloomberg)

Yet another thing for Gen Z bankers to worry about; as well as all the other problems associated with dating in finance, people are now concerned about a “swag gap”, when one half of a couple has noticeably better taste in designer clothes than the other. No ruling, as yet, as to whether vintage banking merch counts positively or negatively. (WSJ)

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