Morning Coffee: Ex-JP Morgan trader found 25% of colleagues at new job inadequate. Citi’s cheap junior bankers are relocating to London

In the taxonomy of heads of investment banking, there are usually two kinds of communication style. One type of leader is an expert at saying nothing but making it sound good.  The other type, like Christopher Willcox of Nomura will give you as much of the unvarnished truth as you can handle, and a little bit more, until you end up recalling TS Eliot's observation that “humankind cannot bear very much reality”. 

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For example, will Nomura ever have another blow-up, like the one associated with the Archegos collapse, and which led to Willcox being promoted to turn its investment banking business round?  Apparently this is “a near statistical certainty, given the nature of the business”. Which is true, but there aren’t many leaders who would put it so bluntly.

And what about employee turnover?  In our experience, almost every management team on the Street will do their best, in the face of almost any weight of evidence, to deny that their turnover is anything out of the ordinary.  Willcox describes Nomura’s level since his takeover as “like permanent Trotskyite revolution … a normal churn for these businesses is five to ten per cent … it’s not easy to turn over 25 per cent”.  Why did the 500 departing employees leave?  No mincing of words there either – some were poached, but most were inadequate for the job. 

Willcox is a rates trader by background. He spent 14 years at JPMorgan, so it's not clear whether he learned this management technique there, or at Citi, where he spent 15 years previously. Maybe both banks set a bar for talent that his new Nomura colleagues didn't meet? Either way, this kind of approach is often surprisingly effective.  It tends to shake things up, and to annoy a lot of people in the early days, but the ones who remain are often extremely loyal.  After all, if someone has demonstrated their willingness to tell the truth when the message is unpopular, that makes anything positive they have to say much more credible.

Willcox does have a few such positive messages.  In particular, his analysis of the relationship between the improvements made to the client franchise and to the risk-bearing capacity of Nomura’s trading desks gives an interesting insight into why some people prefer to work on the sell side rather than in multistrategy pods at hedge funds that need people to put money to work all the time. “If I have a big client franchise … and I know I’m not going to starve if I don’t take risk today . . . I can wait until I have 80 to 90 per cent conviction on a trade. I can also put more risk on that individual trade”, he points out.  Willcox also suggests that a previous problem with Nomura's business was having “the lowest sales to trader ratio in the industry”, and that talking to clients and getting into the information loop is the key to making money.

Another advantage of getting this kind of reputation is that when you tell people to stop playing politics, hoarding capital or other counterproductive behaviours, they will usually believe that you mean it.  So, although Nomura is still something of a work in progress, it might move up the league tables quite quickly.  Everyone says they want bankers who will tell it like it is, but comparatively few banks are actually comfortable with one.  It’s a rare enough experiment to be worth watching.

Elsewhere, the Mediterranean dream is over.  Citi’s Malaga office is closing down.  This was a bold experiment, started in 2022, a year after the great junior banker revolt of the pandemic era. It was meant to provide better work-life balance, a stunning location, and to appeal to the kind of Gen Z banker who would otherwise have gone into fintech or become a digital nomad.

In fact, within a couple of years it gained a reputation for surprisingly grumpy young people, dogged by a perception that they were working there because they couldn’t find jobs elsewhere. A common complaint was that the staff were working 70-90 hour weeks in the hope of impressing someone and getting a transfer to London, while only earning a fraction of the normal analyst program salary or bonus.

At least that last wish is now being granted.  Of the 30 analysts in Malaga, six are leaving the bank, and the rest are being transferred to either Paris or London (presumably with a pay rise to match, or they will have a very hard time finding somewhere to live).  Hopefully they will have a good suntan and at least some happy memories to show for the experience, but it seems that the kind of person who wants to finish early and hit the beach is just fundamentally different from the kind of person that wants to be an investment banker.

Meanwhile …

Different beaches and a very different story – an influencer in Cornwall has been sentenced for running a Ponzi scheme while pretending to be the most profitable hedge fund manager in St Austell.  (In fact, the only hedge fund we’re aware of in Cornwall is on the Trelowarren Estate, about 35 miles away). (Cornwall Live)

The vote on David Solomon and John Waldron’s pay packages went through, albeit with lower support from shareholders than in previous years. (FT)

The fintech winter is now reaching the point at which nasty things start emerging from snowdrifts. Bankrupt invoice financing group Stenn Technologies seems to have had issues with “major clients” that deny ever doing business with them, and so far from getting their money back, backers like Citi and BNP Paribas are beginning to worry that they’ll be “liable to their regulators and subject to large fines”. (Bloomberg)

If you thought the CFA was brutal, there’s another exam which lasts four and a half hours, has a pass rate of 21% and where you’re meant to bring a suitcase into the exam hall to carry all your reference materials.  At the end of it, though, you become a licensed “customs broker”, a job for which there is more or less full employment at salaries from $75,000 to $250,000. (WSJ)

A SPAC owned by Cantor Fitzgerald, launching a Bitcoin investment vehicle, majority owned by Tether and Bitfinex and with a minority holding from Softbank?  It’s actually quite impressive how many rage-buttons the new “Twenty One Capital Inc” launch is managing to simultaneously press for crypto sceptics. (Bloomberg)

Sometimes the old topics of conversation are the goodies – is $100k really all that much in New York these days? (NY Post) 

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