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Morning Coffee: Citi is uncomfortably eliminating some talented colleagues. Deutsche traders can organise secret parties with impunity

It’s landed.  At the Barclays global financial services conference yesterday, Jane Fraser and Mark Mason presented the new management structure.  As had been rumoured, there is no replacing Paco Ybarra (who will serve out the time between now and his retirement next year as a senior advisor focusing on generative AI).  The “Institutional Clients Group” will no longer exist, and Citi will have a separate Head of Markets (former finance professor Andy Morton) and Head of Investment Banking (Tyler Dickson). 

Citi will have five new business divisions, and all the major operating businesses will be run by men; Titi Cole is in charge of “Legacy Franchises”, but other than that the entire leadership team is male apart from Fraser herself, her chief of staff and the head of HR.  And there’s also something of a power imbalance between the two great tribes of investment banking, Sales & Trading and Capital Markets & Advisory.

Basically, Andy Morton is a “business head”, directly reporting to the CEO.  Tyler Dickson, however, reports to Peter Babej, the “Head of Banking” (which in this context means “Banking other than US consumer banking”). Shahmir Khaliq will be “Head of Services”, which includes treasury solutions and securities services.  So that’s two seats at the top table occupied, broadly speaking, by markets people, and maybe half a seat for advisory bankers – Peter Babej used to be global head of FIG, but he's been regional CEO of Asia-Pacific for four years and he’ll be retiring next year, so his ability to win compensation committee fights for the Citi bankers will be limited.

And it appears that the other regional CEO jobs at Citi might not have much of a future.  Going forward, Citi is going to have two geographical regions – US and International.  Jane Fraser’s memo to staff says that the reorganisation will involve “saying goodbye to some very talented and hard-working colleagues”, which might be a hint. 

Citi confirmed that there would be redundancies across the bank as a result of the restructure, although they haven’t given numbers yet.  Mark Mason’s comments on the job losses seem to suggest that they will be mainly a result of delayering and taking out middle management roles rather than in the front office.  He said that since various divisions like the Institutional Clients Group or the regional CEO teams are being eliminated, “that work goes away, those responsibilities go away, those people will have to go away”.

So that’s the plan.  The big risk, as with all such things, is that top employees get to make decisions too.  Jane Fraser said to investors that “It’s going to make some of our people very uncomfortable [and] I am absolutely fine with that”, but analysts like Mike Mayo noted that “The risk for this type of move is always undesired departures and internal strife, especially with Citi’s history”. 

Manolo Falco, for example, was previously co-head of Banking, Capital Markets & Advisory with Tyler Dickson, but now he’s moving into a vice chair role.  He might be happy to spend more time with clients – that’s the purpose of the delayering according to Citi management – but he might not.  And people, including some big revenue producers, will be in similar situations all over Citi’s businesses.

Elsewhere, here’s a much more interesting use case for artificial intelligence than automatically writing limericks about VLOOKUP.  It’s been noted in the trade press for a while that Deutsche Bank’s cloud venture with Google has recently been pivoting quite sharply in the direction of AI, and CTO Bernd Leukert is now giving interviews about the kind of products it’s working on.  One in particular is aimed at an extremely profitable new business line for Deutsche – the activity of “not generating quite so many massive regulatory fines”.

The system is meant to monitor phone calls, transcribe the conversations traders are having, and flag them up for potential nefarious activity.  However, at present it can’t distinguish tones of voice.  Which matters, because most of the time when people say “let’s have a coffee”, they just want to meet a friend; it’s not always a euphemism for “let’s discuss insider information”.  The new AI-enabled system will reportedly be able to distinguish innocent uses of “keep this a secret” in relation to birthday parties (for example), and give more useful alerts.  It’s clearly a growth area for Deutsche – they have apparently posted 1,300 job vacancies in AI-adjacent technologies between February and April.

Meanwhile …

Although the London staff of Credit Suisse are going to have to change their commute, it isn’t the same in New York.  Wealth management employees are being collected together at UBS’ Midtown premises, while the traders and investment bankers are having to move from UBS to Credit Suisse’s old office. (Bloomberg)

The success of “quiet quitting” continues to spawn dozens of bogus workplace trends; we have “5:01 and done” to describe people who don’t want to socialise after work … (WSJ)

… and “boreout”, which is like burnout for people whose jobs aren’t particularly stressful but just suck. (NYPost)

There’s been another potentially significant internal restructuring on Wall Street; Blackstone is combing its credit and insurance businesses into a new division imaginatively entitled “Blackstone Credit & Insurance”. (FT)

Another classic co-head move at JP Morgan – Marco Caggiano is being replaced as head of North American M&A Advisory by Jay Hoffman (a two-decade veteran tech banker based out of New York) and Ben Carpenter (a recent hire covering the healthcare sector out of San Francisco). (Bloomberg)

If you want top techies, you have to go to where they are.  Man Group hired Deyan Pandulev from a Bulgarian online gaming firm in August, and now they’ve given him a mandate to hire locally and develop relationships with universities in Sofia. (Financial News)

This is a surprisingly common thing to find in any bank, because IT projects tend to hang around until a specific decision is made to cancel them – as part of the thorough review of its technology, Deutsche Bank realised that it was able to get rid of 60% of the underlying applications in its fixed-income trading operation. (Bloomberg)

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AUTHORDaniel Davies Insider Comment

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