Morning Coffee: Bank discovers how to cut 20% of staff without firing anyone. The banker who keeps flying back to London

“We know that more must be done to enhance our returns and competitiveness”.  Any experienced banker knows that when you hear a phrase like that, bad news is in the very near future.  In this case, it’s coming from Marguerite Bérard of Dutch bank ABN Amro, and it’s describing a new plan to cut fully 5,200 jobs from a staff of 27,500 (including two acquisitions which haven’t yet been fully integrated).

Bérard says they are going to try to be as nice as possible about it.  Anyone who is cut will be supported with “a robust social plan, offering financial support and assistance in finding new opportunities”. However, few bankers may need to take advantage of this, because she also said that at least half of the cuts (between now and 2028) will be achieved by “natural attrition”. No one will be fired. 

This is often regarded as the nicest way to lose headcount. From the employees’ point of view, nobody has to have the horrible experience of being fired, and from the employer’s side there’s no severance to pay; you just don’t replace people as they leave, and try to fill as many necessary vacancies as possible with internal transfers.

The trouble is, it doesn’t always work.  For one thing, attrition rates are currently very low indeed, as many bankers don’t trust the labour market and are keen to stick with the job they have rather than taking any career risks.  Earlier in the year, for example, Bank of America decided that attrition wasn’t getting them where they wanted to go quickly enough, and ended up cutting jobs.

There is also a well known problem that when you rely on attrition, you don’t get to choose who leaves. As Marguerite Bérard admits, any cost-cutting program is going to “bring uncertainty for our colleagues”.  And when people feel that uncertainty, they start looking at job boards and answering calls from headhunters. That means that the people who are among the first to leave during a period of attrition are exactly the ones you might have wanted to keep, because they are the employees who are first to get alternative offers.

And of course, not all headcount reductions are equal.  Deutsche Bank, for example, had a very big program a few years ago, using technology and outsourcing to cut jobs that the former CEO described as “basically an abacus”. But having taken out low-cost headcount in the back and middle offices, it ended up adding a lot of the costs straight back again in the front office.  That turned out to be a good exchange for Deutsche, as the revenues followed, but it shows that plans announced in terms of FTE numbers need to be flexible.  (Deutsche is now trying to cut expensive heads with a management delayering initiative.)

ABN AMRO's share price certainly seems to have responded favourably to the announcement, which suggests that there may have been some cynicism about how much value a fifth of ABN Amro’s bankers were really adding.  Those who survive the cuts, and don’t succumb to attrition, might have more valuable stock options at the end of it all.

Elsewhere, James Brocklebank is “moving my centre of gravity to continental Europe”.  Since that’s roughly at the centre of the pelvis, this means that the co-chair of Advent International, the private equity firm, will be shifting his residency to Luxembourg.

It’s not clear what attracted him there – “the tax implications could not be established”, apparently, but there’s also interesting historical monuments and some underrated vineyards along the Moselle.  Luxembourg is also one of the cheapest places in Europe to buy cigarettes.  More boringly, Advent has an office there and as a major centre for fund administration it’s quite important to their European deals.

Anyway, Brocklebank says that “my focus will be on providing enhanced, hands-on support for our local teams across the region as well as the UK”, and that he will still be coming back to London for important meetings. It’s seventy-five minutes to City Airport on Luxair or five hours changing in Paris for the Eurostar, so he will probably be looking into some carbon offsets.

Meanwhile …

“ I never experienced my body just physically shutting down as it did today. It wasn’t an exceptionally insane day either, just a back-to-back domino chain of things going wrong and immediate fixes needed”.  A thread started by a third year private equity associate going through a series of panic attacks has gone viral – it’s slightly disturbing to see how many of the replies are talking about similar experiences and/or recommending drugs. (Wall Street Oasis)

After a rocky start, Boaz Weinstein finds that he is in a happier place as his adventure in UK investment trusts gets more friendly and less activist.  “It is clear we have been a force for good” he says, while congratulating UK boards on their corporate governance.  (Investment Week)

A couple of years ago, some alt-data experts left Yipit to go to work for M Science.  The resulting lawsuits might have set some important precedents about trade secrets and proprietary knowledge (and ruffled a lot of feathers in the small world of hedge fund data vendors).  But now those questions will remain uncertain as the case has been settled out of court. (Business Insider)

Indian workplace culture is apparently unpleasantly hierarchical and political compared to Singapore or London, according to an expat who returned to India when her job was outsourced. (Economic Times)

Between Brexit, the pandemic, remote working, food cost inflation and even rising shoplifting, poor old Pret a Manger can’t seem to catch a break.  The latest idea is that people who saved money by working from home might be tempted to treat themselves to a “super plate” on their days in the office.  As one City worker said, however, “charging £12 for a salad is pretty crazy”. (Bloomberg)

In a world of geopolitical tensions, risk managers are getting increasingly worried that Ireland is a neutral country which spends hardly anything on defence, meaning that a number of very important transatlantic cables are practically unprotected for some of their length. (FT)

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