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Morning Coffee: Barclays and Citi got bored waiting for bankers to get busy. Goldman Sachs needs to promote a particular kind of partner this year

The most fundamental strategic decision of them all for an investment bank is in many ways the simplest – are you playing offense or defense?  Which is to say, is the underlying assumption driving all the other decisions that you’re in a growth industry which is suffering a temporary setback?  Or, are you working on the theory that the overall revenue pool is significantly impaired, and the cost base needs to be trimmed to match it?

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It can be surprisingly hard to understand from outside which team is on the field, because banks tend to be reluctant to admit they are playing defense until very late in the cycle.  It’s not great for morale, and there’s a danger of a self-fulfilling prophecy. Glum bankers don’t win mandates, and good people tend to prefer to work in optimistic environments.  Although the dangers of remaining in denial can be even greater and more destructive, most banks like to keep a brave face for as long as possible.

However, it’s increasingly beginning to look as if Barclays and Citi have adopted defensive formations.  Both firms have cost-cutting programs which were announced in a manner intended to indicate that they're still committed to their investment banking franchises.  However, both are behaving in a way that suggests that while they’re committed to having presence in the industry, in the light of the failure of deals to return they're asking questions about its size.

At Citi, for example, the program of 20,000 cuts was originally presented as an exercise in “delayering” management and thinning out support functions.  Although we noted a few times that some people were being cut who couldn’t really be described as “not revenue generating”, it seems that the 20 layoffs in London are now mainly coming from front-office dealmakers of all ranks.  This isn’t delayering – it’s getting rid of actual bankers.

Barclays, on the other hand, is spinning the coming “hundreds” of cuts across trading, dealmaking and research as merely its annual “review of the talent pool” in the investment bank. This seems curious given that there was also an annual review of the talent pool back in September 2023, when there were reports of 5% performance-related layoffs, and it was understood that there would be another round before the bonus season.  Either this is the same set of job cuts being reported three times, or Barclays annual review of the talent pool is a triannual thing after all. 

The cuts to investment banking staff imply that, despite complaints that people are busier than ever, they're actually busy doing nothing and that banks have grown impatient with the failure of all the activity to generate actual fees. 

Unfortunately, constant rounds of cuts end up being counterproductive.  To begin with, staff might find it reassuring to think that the people being cut had it coming.  But as cuts drag on, it has the opposite effect.  People start to worry that if they aren’t safe, how can any of us be?

For this reason, ironically, it’s often the case that straightforward bloodless cost-cutters and COO types (like Barclays’ former head of IB, Paul Compton) handle the transition from offense to defense best.  They're less sentimental, less congenitally optimistic and less keen to be liked. 

Elsewhere, Goldman Sachs has sent out an internal memo with some talking points in response to the Wall Street Journal story earlier this week about departures among its most senior women. It makes the point that the managing director (MD) class of 2023 and the partner class of 2022 both had the highest percentages of women to date, and that the proportion of female MDs has risen by 4% since 2018.  Even so, women are still only 26%, and 19% of the partnership.  As David Solomon comments, “Our longer term success depends significantly on developing female partners in senior roles”.

This surely sends out a signal for this year’s partnership round (and potentially for quite a few more).  It might be bad news for ambitious male Goldman MDs on the cusp of being made partner.  Adjusting a big imbalance in a stock often has paradoxical consequences for flows, and the “transitional generation” of male Goldmanites might fairly feel aggrieved that they are the ones who are going to suffer for a problem caused by men who are a lot older than them.

Meanwhile …

Screams of joy, emergency brain surgery and selling baseball tickets – the unique stories of the lucky college seniors who got the best internships this year. (WSJ)

Is Sam Bankman-Fried “a depraved super-villain”? Does he have “dark and megalomaniacal motives”? Would “apocalyptic prophecies of recidivism” be reasonable?  Does he deserve “a medieval view of punishment”?  His lawyers argue otherwise, describing, in somewhat purple prose, the prosecutors as demanding “what amounts to a death-in-prison sentencing recommendation”. (Bloomberg)

A former Barclays legend is back in the game – Matt Stanton, who was head of Americas sales trading for Barclays until 2023, has joined HSBC to perform the same role. (Financial News)

The popular Swiss gossip blog won’t have to change its name – although it might not be “the most viable commercial solution” according to Sergio Ermotti, the former Credit Suisse offices on Paradeplatz in Zurich are too iconic to get rid of, so they will be turned into a “campus” with 4000 work spaces. (Finews)

It’s an ironic truth that lots of people in the money management business are absolutely terrible at managing their personal finances.  JPMorgan’s former head of retirement solutions passes on the tips and habits that she had to learn when she realised that she was designing target date funds for clients but not contributing anything to her own pension savings. (Business Insider)

A wild story of alleged money laundering and a USB stick that turned out to have $1bn of bitcoin on it. (FT)

Glassdoor is going to make people sign up with their real names, so the joy of saying exactly what you thought about a former employer will be somewhat less consequence-free. (WIRED)

Have a confidential story, tip, or comment you’d like to share? Contact: in the first instance. Whatsapp/Signal/Telegram also available (Telegram: @SarahButcher)

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AUTHORDaniel Davies Insider Comment

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