Morning Coffee: Why Deutsche Bank didn’t cut 18,000 jobs after all. The 37 year-old woman at the top of Bridgewater
Now that banks are banging the drum for job cuts again, it's worth remembering that their actions are not always as good as their words: they might say they're cutting tens of thousands of jobs; doing it is another matter.
The latest perpetrator of this kind of over-promising is HSBC, which declared in February 2020 that it would be cutting 35,000 jobs. It's no more than halfway through this, and yet down to trimming around the edges.
Another exemplar is Deutsche Bank. In 2019, under its then-new CEO Christian Sewing, Deutsche embarked upon a program to eradicate 18,000 jobs in an effort to cut costs. The equities division was dramatically closed, and a few people bravely dribbled out of DB's London office clutching boxes, but nearly four years later Bloomberg reports that only 8,000 jobs have actually gone. This was apparently intentional: as revenues grew more than expected, Deutsche discovered that it needed an extra 10,000 people after all.
Deutsche's under-delivery of job cuts is worth bearing in mind in 2023. Following the slowest January for investment banking fees since 2009, banks will be under pressure to trim headcount dramatically again this year. Bold statements about tens of thousands of layoffs are a good way for an incoming chief executive to make his mark, but the reality may be rather different.
After a few years in the role, Sewing now thinks making 55% of the cuts he promised was sufficient and has left the bank well-placed for the future. "If you take the three or four-year average, we have reduced headcount more than our competitors. Some of our competitors increased headcount considerably over the last one or two years and are now taking it back," he declared yesterday. "There is no guarantee that we will not be reducing headcount in this or the other way, but we also want to grow. We want to invest, for example, in technology."
Separately, women are permeating the top ranks of the hedge fund industry: Soros Fund Management has Dawn FitzPatrick, Citadel has Joanna Welsh, and Bridgewater has Karen Karniol-Tambour, who was promoted yesterday to chief investment officer.
37 year-old Karniol-Tambour joined Bridgewater out of college and was clearly not among the people who resign due to its idiosyncratic culture. Bridgewater chief executive Nir Bar Dea said he recruited her many years ago and was struck by, "her courage, her deep care for others, and her creativity and tenacity in the face of our most important challenges and opportunities." Karniol-Tambour is clearly kind and could probably have a job with Rich Handler at Jefferies if she ever decides that Bridgewater is too much.
Meanwhile...
Christian Sewing thinks the tide is turning. "There are the first indications that the investment banking business in 2023 is coming back. Not to the degree we saw in 2021, but it's coming back and that will, in my view, compensate for a potential decline in the FIC business." (Financial News)
Deutsche Bank's market value persistently trades well below tangible book value, currently only 40%, and this is only slightly above the five-year average. (Financial Times)
14% of traders say they “feel or have felt close to breaking point”, triple the level who said so in 2021. (Financial News)
Barclays fixed income trader's bonuses may increase 15%. Its investment bankers' bonuses may fall 40%. (Bloomberg)
Led by Ed Emerson, Goldman Sachs' commodities traders made more than $3bn in revenues last year. (Bloomberg)
Brevan Howard is opening a 100-person office in the Middle East. (Bloomberg)
Ex-Goldman CFO Harvey Schwartz might become chief executive of Carlyle Group. (Financial Times)
The SEC wants to check the WhatsApp messages of employees at Point72, Citadel and elsewhere. (Bloomberg)
Credit Agricole used quantum computing to value financial products and calculate credit risks. (Finextra)
Zeth Hung, the vice chairman of investment banking at Credit Suisse in Asia, is stepping down after 25 year, (FiNews)
Hedge fund ExodusPoint did not have a good 2022. It only rose by 5.5% to 6% and while it started 2022 with 108 portfolio managers and arrived in June with 106, by the end of the year its portfolio managers were down to 81. (Business Insider)
Stuart White, head of the UK asset management business at HSBC, says a single conversation at work was the catalyst that helped him deal with the depression caused by his daughter's attempted suicide. “That made all the difference, just having that one conversation. And then I sought help and my wife did too.” (Financial News)
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