It’s … quite difficult to interpret what’s going on at Credit Suisse. On one hand, the bank has just had its third consecutive profit warning, and “people with knowledge of the matter” are talking about headcount reductions later in the year unless things turn round pronto. On the other hand, presumably people at the bank were aware that a high-profile interview was going to be published yesterday with a headline saying that CS was getting its swagger back. Presuming that it isn’t a simple case of mistaking the word “swagger” for “stagger”, there are a number of possible interpretations of what they might be trying to communicate.
Perhaps the most likely explanation might be that it was just a confidence raising exercise, in which David Miller was asked to make a small investment of his personal credibility in trying to maintain morale. He’s now publicly committed to the statement that Credit Suisse is itself committed to its investment bank and to continuing to rebuild and grow the franchise. If this turns out to be true, he’ll have gained in stature with his staff and will look like the leader who protected them from the board. If it doesn’t, then anyone who made career decisions based on these promises will be angry, but if CS cuts the investment bank it’s likely to cut its top management too.
Alternatively, both statements could be true at once. Miller was talking about hiring Managing Directors, while the people quoted about future headcount were talking about “laying off underperformers, not replacing departing staff and hiring fewer graduates”. The official line is that none of the bank’s planned cost savings are coming from headcount reduction. This could still be consistent with a model in which CS plans to deal with the task of building back in tough conditions by becoming temporarily top-heavy; taking rainmakers from other banks during a bad bonus year, then letting them build teams around themselves when conditions get better.
But there’s a third possibility, and it’s much more worrying. The danger is that CS is simply in denial about how bad things might get. Inside Paradeplatz paints a pretty apocalyptic scenario in which revenues continue to spiral downwards, legacy losses mount and the bank’s capital gets increasingly impaired. This doesn’t look particularly likely – lots of different things have to go wrong for it to happen. But nor can it be completely ruled out – after all, lots of different things have already gone wrong.
In that situation, one way or another, the future of Credit Suisse’s investment bank, and its bankers, would not necessarily be under the control of anyone who’s there today. Inside Paradeplatz points out that the share price is almost as cheap as a cup of coffee at the Sprüngli confectioner’s, which means that even quite wild takeover rumours, like today’s speculation about State Street, can’t be completely ruled out. All in all, it would be very convenient indeed if David Miller turned out to be right about momentum turning round, and potentially quite dangerous if he isn’t.
Elsewhere, can you think of a finer name for a finance-centred romance novel than “The Heart Of The Deal”? It’s certainly better than “Lover’s Poker”, “A Romantic Walk Down Wall Street”, “Barbarians At The Kissing Gate” or anything else we could come up with. Its author, Lindsay MacMillan, is a former Goldman banker who wrote her book by getting up early to sit in a Starbucks at 6am every day and write for three hours before going into the office. (If you’re immediately thinking that this doesn’t add up in terms of timings, it seems from LinkedIn that she moved from private credit to the Marcus operation and was a Vice President by the end of her banking career,).
Obviously, the decision to leave Goldman for a full time writing career wasn’t made for financial reasons – she has a two book deal, but there are probably more people alive today who have played in a World Cup Final than have made investment banking money out of fiction royalties. But, when she left, her fellow bankers wished her well with “a wistfulness in their voices, as if they were wondering where their lives might be if they, too, had chased down their childhood desires”.
Frédéric Oudéa of SocGen says that the war for talent has “normalised” and hiring is easier, particularly in Europe. He also suggests that his successor as CEO should “carry on thinking about significant transformation of the business model” (Financial News)
The stage version of the Wall Street classic movie “Trading Places” has opened in Atlanta and is heading for Broadway. It seems to be only loosely based on the original – the Eddie Murphy character is now a woman. (Reporter)
There are going to be two investment bankers among the contestants (unfortunately, only identified by first names so we can’t find out which banks) in the next series of The Bachelorette. (Variety)
Asoka Woehrmann says that in the wake of the DWS greenwashing scandal he received not only personal attacks but also anonymous threats which put such a strain on his family that he had to resign. (Financial News)
Bouncing back! Crispin Odey has “the ability to remain in an uncomfortable place for an uncomfortable amount of time”, and this year he’s proved it – his bearish bets have finally paid off and he’s now back above the high water mark his funds set in 2015. (Bloomberg)
Marco Argenti of Goldman Sachs seems committed to the partnership with his former employer at AWS. Although Goldman will use other cloud providers where needed (a “polycloud” strategy), he seems to want developers who are able to use the specific capabilities of particular cloud providers, not generic “cloud-agnostic” skills. (Business Insider)
A couple of hires at Barclays – they have brought in Alexis de Rosnay from Oddo BHF to be chairman of healthcare investment banking … (Bloomberg)
… and Jim Rossman from Lazard to be global head of “shareholder advisory” (which is to say, activist defence) (Bloomberg)
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