Morning Coffee: The strangest thing about Deutsche Bank's latest restructuring. Facebook's AI to replace M&A bankers
Deutsche Bank is making good on the new-new strategy it announced in March this year. As it goes out to attract corporate clients over institutional clients (along with Goldman Sachs), Deutsche has unveiled a new structure for its investment bank.
On one side, will be corporate finance (M&A), global capital markets (ECM, DCM and leveraged finance) and the institutional client group (ICG), which sells products into institutions (institutional fund managers, hedge funds). This will be led by Marcus Schenck, the "affable, ambitious" former Goldman Sachs banker who used to be Deutsche's CFO. On the other, will be a unit focused on "products and processes", including equities and fixed income trading, electronic trading (of all kinds), clearing, and transaction banking. This will be managed by Garth Ritchie, the Deutsche Bank lifer who rose through the ranks of the equities division, but has run the whole of global markets since 2015.
Schenck and Ritchie's appointments were already known, so the new announcement is merely a clarification of their responsibilities. So far, so good - except it's not immediately clear whether layoffs will accompany the changes and whether the (alleged) last minute stay of execution on Deutsche's ICG group from earlier this year is about to be lifted as institutional fixed income revenues seem bound to disappoint.
The most curious thing about the whole new structure is instead the fact that the new global capital markets division under Schenck's purview is being run out of New York and Frankfurt. Not London.
Why is this? Naturally it's tempting to blame Brexit. Two months ago, Sylvie Matherat, Deutsche's chief regulatory officer, warned that 4,000 of Deutsche's 9,000 London jobs could be moved to Frankfurt after Brexit. A separate report from Boston Consulting Group cautioned that banks like Deutsche could face punitive post-Brexit capital requirements if they maintain large operations in London and Frankfurt after Britain leaves the EU.
There could always be a more benign explanation. The new Frankfurt unit is being run by Alexander von zur Muehlen, the former Deutsche Bank group treasurer who swapped places with Dixit Joshi, the former head of the ICG in April. A onetime head of corporate coverage in Europe for Deutsche, von zur Muehlen is clearly tasked with pursuing all the bank's new corporate clients. Maybe he simply likes living in Frankfurt?
More likely, however, is that Deutsche's pursuit of corporate clients in Europe is being led out of Germany both because that's where DB's corporate relationships are strongest and because Germany will offer access to the whole of Europe post-2020, whereas London will (probably) only offer access to the UK. There have been various warnings that Brexit risks dispersing banking businesses out of London and into NYC and continental Europe. In the case of Deutsche, this looks like becoming a reality.
Separately, Goldman Sachs may have found a way to get artificial intelligence to do the work of junior bankers, but Facebook seems to have found a way to get artificial intelligence to do the work of VPs and MDs. Techcrunch reports that the social networking site is developing a conversational artificial intelligence app that allows machines to negotiate with human beings. The result is reportedly machines capable of "complex bargaining." Maybe computers will be able to manage M&A negotiations themselves in future?
ABN AMRO is hiring investment bankers in Frankfurt. (Financial News)
RBC is building a U.S. prime brokerage business led by Jonathan Yalmokas, who just joined from BofA. (Reuters)
Barclays hired Chris Leonard, who founded his own hedge fund, to run its underperforming U.S. rates trading business. (Bloomberg)
Death of the equities trader: J.P. Morgan says only 10% of stock picking is now done by humans. (CNBC)
Banker tells students who want to work in banking that they have to read the entirety of the paper - even the style section. (Business Insider)
Goldman Sachs plans to power its U.S. operations entirely using green energy. (Bloomberg)
Bank of America's cutting tech staff in Charlotte. (Reuters)
James Gorman falls foul of internet prankster talking of black bushy eyebrows. (Financial Times)
Google's building houses for its employees. (WSJ)
Neoliberal memes. (Reddit)