Morning Coffee: The 'rude' banker with the $32m bonus & the future of Europe. Precarious jobs at hedge fund Millennium
Is Andrea Orcel rude? This depends on who you ask. Did he once make a $32m bonus? Maybe more. Does the future of the European banking sector depend upon him? Possibly so.
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Orcel is "Marmite" according to a former colleague speaking to the Financial Times: "either you hate him or you love him.” The Times has rumours of an 'explosive temper.' The FT says his behavior can make him look like "an arse."
But if Orcel sometimes seems poorly behaved, it's for all the best reasons. If he seems an arse it's simply because he, "just does what he thinks is right" irrespective of how he might be perceived. He doesn't play politics, he's a "no bullshit guy" people tell the FT. He's "absolutely brilliant," a former colleague tells the Times. Orcel holds other people to the standard he holds himself. He's no snob: he goes by his first name; most Italian executives prefer the pretensions of their second.
Orcel works all the time, but he doesn't need money. The Times says he earned a $32m bonus in 2007 at Merrill Lynch; the Wall Street Journal says he actually earned $38m in 2007 and then $34m in 2008. $12m of Orcel's 2007 bonus was said to be for his advice on RBS's disastrous $101bn acquisition of ABN AMRO. He received another €43.4m ($48m) from Santander, which was going to make him its CEO in 2018, before withdrawing its offer when Orcel, who'd already quit UBS, wanted his bonuses bought out. Santander is contesting the settlement, though.
As he uses his position as CEO of Unicredit to attempt to acquire Commerzbank, Orcel has emerged as a decisive figure for European banking and by definition maybe Europe itself. If he succeeds in combining Unicredit and Commerzbank, it will be a major step for European banking integration. If he doesn't, one German pundit tells the WSJ, “it basically means the European project of a real banking union is brain-dead.”
However, as the FT points out, merging Unicredit and Commerzbank isn't that simple. It's not just that German unions are objecting to the potential loss of two thirds of Commerzbank jobs and that the German government is against the merger, it's the fact that there's still no Europe-wide bank deposit guarantee scheme. If, one day, the combined Commerzbank-Unicredit entity failed, the Italian government would be responsible for bailing out the German depositors.
The German government is understandably wary of this. And yet, unless this hurdle is overcome, European banks will struggle to compete with their much larger American rivals. The Times notes that JPMorgan has a stock market valuation equivalent to the 12 biggest European banks combined. Even if Unicredit and Commerzbank do merge, they'd only be worth 15% of JPM.
Orcel is the man to make it happen, or not. If he does, he'll transform the European banking landscape and maybe even force through a deposit guarantee scheme, with all its implications for closer EU governance. If he doesn't, European banks will remain a fragmented force. BCG says the Europeans lost market share across all investment banking product areas to the Americans this year; Orcel might be the man to turn the tide.
Separately, working for hedge fund Millennium can be very lucrative, but it can also be very precarious.
The Wall Street Journal notes that Millennium is especially strict when it comes to stopping out portfolio managers who make losses. If a portfolio manager there is down 5%, some of his/her capital is removed. When he/she is down 7.5% they're usually fired with occasional exceptions.
This approach means 15-20% of Millennium's staff leave every year.
Meanwhile...
“If you can export German cars to Italy, why not export Italian financial services to Germany?” (WSJ)
UBS chairman Colm Kelleher says he underestimated opposition to Sergio Ermotti's $17m pay package. Ermotti works “around the clock, seven days a week, to make something good come out of this completely disastrous situation that we found in March 2023," he says. (Bloomberg)
Systematica hired six researchers to introduce and format new information sources for its investing. They are integrating a fresh data set each week, including some as unconventional as AI that extracts sentiment from the speeches of chief executives and policymakers. (Bloomberg)
Bank of America put two Indian bankers on leave in relation to allegations of tip offs to investors over upcoming secondary offerings allowing them to “front run” the stock sales and profit from nonpublic information. (Financial Times)
After last year's bad bonuses, senior leveraged finance bankers keep moving to private credit. Sometimes they even get equity in the funds. (Bloomberg)
Singaporean commuters have been in meltdown. (Bloomberg)
Berenberg has changed its team after UK regulators allowed "selective rebundling" and rolled back rules that forced fees for trading and research to be split earlier this year. Two people, Stuart Holt and Richard Payman have left. David Hogg is the new head of European sales. Rob Chantry will take on a newly created role of head of UK company research. (Financial News)
High performing workers amidst low performing workers can be persuaded to accept low pay in return for prestige. (Rob Henderson)
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