Morning Coffee: The WhatsApp messages that led to a senior partner leaving a consulting firm. Andrea Orcel to lead HSBC?

It is not wonderfully clear what has happened to Tim Howarth, until recently the head of financial services consulting at KPMG.  Has he been fired, “forced out” or resigned? What is the status of his appeal and is it true that there is “no complainant and no formal allegations”?  The only concrete fact we seem to have is that it relates to WhatsApp messages.

WhatsApp seems to be the hot thing in terms of generating controversial banking stories this year – the ubiquitous messaging service seems to fulfil the same role as Bloomberg Chat for people who don’t have terminals.  That means that, despite all the post-LIBOR crackdowns on behaviour in electronic comms, everyone in investment banking, from the “Intern Class 2018 Beers & Memes” to the “Global Equities Management Social” can enjoy the fun of having a little forum of like-minded souls in the same industry, just like “The Cartel”, “Old Gits #2”, “Essex Express” and all the other ones that have shown up in criminal trials of their members. It’s notoriously difficult for employers to monitor – unlike terminal or PC-based chats, all the action happens on personal mobile phones, and it’s encrypted. 

But the fact that WhatsApp is potentially a little bit more secure for the users doesn’t make it any less of a risk to job, status and continued regulatory authorisation.  People (particularly those of us slightly older than the millennial generation, who didn’t grow up with this sort of thing) seem to have a huge blind spot for text-based chat systems, believing that once something’s scrolled away or been deleted, it’s gone.  In fact the opposite is the case; it’s potentially there forever.  And even if you successfully delete all the copies of the incriminating messages, what about the copies on the phones of all the people you sent them to?

So – and this is not exactly legal or careers advice, but a reminder of common sense. -  If the thing you want to say to someone is something that you’d feel embarrassed or ashamed to say to them directly in a public place, that might be a sign that it’s not a good idea to say it at all.  Because not only do text-based communications have the potential to come back to bite you, you can also be pretty sure that when they do so, the very most damaging things will appear stripped of all their banter and potentially exculpatory context.  A useful rule of thumb might be that before posting something, you should consider how it would sound if it was being read out loud by a sarcastic lawyer in an employment court.

Anyway, on to more cheerful matters.  The speculation has begun over who will be the next CEO of HSBC, and according to some of the analysts and headhunters surveyed, Andrea Orcel ought to be in the mix (interestingly, nobody suggested Iqbal Khan, the other big name in investment banking who’s currently on the bench).  The idea seems to be that, along with all the strategic ideas that he was developing for another global banking conglomerate, Orcel would be able to put his dealmaking expertise to good use in consolidating the wealth management and fintech sectors of the APAC region.  Of course, he hasn’t got much background in Hong Kong or Greater China, but in the current political climate this might not be such a bad thing if it means he starts with a clean slate.

The other key name in the frame seems to be CFO Ewen Stevenson, technically an internal appointment but realistically more of an outsider.  That could be good or bad news for the HSBC investment banking franchise; Stevenson knows the industry well having spent the majority of his career at Credit Suisse, but he was brought in to oversee a cost-cutting program and might be reluctant to support businesses without a clear path to their RoE targets.  After all, few people are as cynical about the investment banking industry as those who were once its stars.

Meanwhile …

Apparently “tens” (but not hundreds) of thousands of dollars were spent by Och-Ziff on coming up with their new name  of “Sculptor Capital Management”, which apparently is meant to signify “dedication, persistence and vision”, rather than bring up the image of fees chipping away at the investors’ capital.  They felt they needed a new name after the retirement of Dan Och. (Bloomberg)

A first year analyst at RBC Capital has been charged with insider dealing (buying options ahead of a private equity take-out financed partly by RBC), with the alleged trades taking place barely nine months after he joined the bank (FT)

Where do the top bankers go on holiday?  Mykonos has too many Instagrammers, while hotels in Ibiza are strictly for tourists – Bali is back though.  If the bonus doesn’t quite stretch to a compound in Beverly Hills, Portugal and the Cotswolds are popular. (Finews)

Deutsche Bank’s head of ECM, Joseph Ritter, has admitted that the last year of newsflow has been bad for the brand, but is still ambitious about getting back into the top ten for European ECM and eventually back into the top five.  Competitors think that’s going to be difficult given the lack of trading capability. (FT)

The previous head of “activist defence” at Goldman Sachs left to join an activist hedge fund, so now Avinash Mehrotra, previously head of financial institutions M&A, has been appointed to the job (Financial News)

The grim truth is that, unlike previous cycles, it’s possible that many of the people made redundant in the current wave of job cuts will never get back into the investment banking industry (FT)

Citi is closing its “Credit Opportunities Group”, as competition from hedge funds and private equity has intensified in the mid-market opportunistic lending space. (Business Insider)

Jeffrey Epstein has a brother, whose wealth is equally mysterious and whose Wall Street connections are equally hard to verify (WSJ)

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