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Morning Coffee: The 22 year-olds who want to work for HSBC instead of Goldman Sachs. Jefferies thinks the deal drought is over

As anyone who’s spent time with them knows, you’ll be very happy in your life if you can find someone who pays you as much attention as a banker does to a league table, particularly one where their bank isn’t quite at the top.  Consultants and other professional services firms know this, which is one of the reasons why companies like Universum (which is in the business of providing research and advice on “employer branding”) like to publish summaries of their extremely expensive proprietary surveys from time to time – the prospect of going from number six to number two in an arbitrary list is a reliable way of opening banking executives’ wallets.

The survey that’s just been concluded in Hong Kong, though, is quite an interesting snapshot of how things are in that market, though.  The top two most desirable employers according to business and commerce students were HSBC and JPMorgan.  Morgan Stanley was up from sixth to third position, but the next two names were Google and the government; Apple and Goldman Sachs were outside the top five.

People might be forgiven for saying “who cares what four thousand students think”, but the names are interesting.  It’s not hard to see why HSBC is up there – it’s the home team and the dominant local/global player, it literally prints money.  But JPMorgan is a more interesting choice.  They’re a good franchise there, but neither they nor Morgan Stanley are so spectacularly different from the pack in terms of investment banking fees for it to be obvious why they’re so far ahead of Goldman (or indeed, Apple).  Could they have gained a bit of brand recognition with students from Jamie Dimon’s quickly retracted comments about the future of China from 2021?  The juxtaposition of Google with the Hong Kong government is also interesting, given that the first of these is currently in quite a fraught dispute with the second over censorship.

It's also interesting to see what the students want from an employer.  “High future earnings” is only the fourth most important characteristic for this survey, even though HK bankers apparently pick up a taste for money once they get off the graduate program.  The top desire was for “a friendly work environment” along with “encouraging work-life balance”. 

Since the people being asked literally don’t know what they’re talking about, these surveys generally reflect a mixture of media profiles, wishful thinking and sheer guesswork.  Famously, the proportion of the Harvard University graduating class going into finance jobs is a notoriously accurate contrary indicator for markets.  And all the big banks have so many applicants for every job that there can’t be any realistic effect on recruitment quality.  But nonetheless, in a world in which the Hong Kong financial sector is changing rapidly, it’s worth knowing what kind of things the new generation might be thinking about.

Elsewhere, gloomy bankers never win mandates, and for this reason alone, it’s usually sensible to discount predictions of recovery when they’re based on little more than bland optimism.  Brian Friedman of Jefferies, on the other hand, seems to be offering something a bit more substantial.

He’s certainly handing out bland optimism too, saying “you’re seeing the kinds of things you see at the turning point, where you’re bouncing off the bottom and you have the chance toward a path to a more normal, positive environment”.  But although Jefferies’ investment banking revenue was down 26% for the second quarter, the last month actually saw an increase in activity.  Following on from that, Friedman was able to report “more meaningful conversations with clients about future opportunities” in an interview.

In three weeks’ time, those conversations are likely to halt for the summer break, of course.  But a strong back-to-school season (versus an easy base for comparison) could set up a surprisingly strong end to the year if it’s true that “the markets can get better even as the economy is slowing” (another optimistic thing that bankers always like to say).  Turning points are only ever identifiable in retrospect, but if this deal drought is coming to an end, many bankers will say that they got off lightly compared to previous cycles.

Meanwhile …

The FCA wants to hire “top talent” over the next four years, and appears to be willing to pay £8m to do it.  That’s a funny amount in many ways – as a salary budget, it seems too small by a significant amount, but as an upfront payment to a search firm it seems like quite a lot.  The tender details don’t make it particularly clear, but perhaps there’s an element of headhunter commission paid up front.  (Financial News)

Nobody does anything just for fun anymore apparently, but taking holidays is apparently good for creativity and productivity.  Boston Consulting Group apparently used to have to force consultants to take holidays and even had to deal with their feelings of anxiety and guilt from not being in the office. (WSJ)

Having agreed to set an example to the nation by holding pay rises to 1.5%, the Bank of England went on to set a different kind of example, by giving up in the face of retention crises and threatened strikes and paying out more than twice as much.  It’s also setting an example to the banking industry by being below its minimum capital level for the third year running. (Bloomberg)

Petershill Partners, the investment vehicle set up by Goldman Sachs to hold minority stakes in private equity firms, has not been a great performer since its IPO. (The Times)

Nobody knows why, but statistically, the longer and more pseudo-intellectual a hedge fund’s name is, the worse its performance is likely to be. (WSJ)

As is always the case in big banking mergers, sometimes the staff that leave are the ones you had really hoped to hang on to.  The Credit Suisse private bankers in Qatar have apparently decided they don’t want to see how the deal works out and have left to HSBC. (FT)

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AUTHORDaniel Davies Insider Comment

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