Morning Coffee: HSBC's London bankers might be happy the boss has left for Hong Kong. European bankers might need to trade down in jobs to get paid

One of the great divides in investment banking is between those who love business travel, and those who find it a horrible chore.  When you’re young, almost everyone wants to be on the road; an average hotel is usually nicer than your house, and how often do you get to fly business class otherwise?  As you climb up the ranks, though, your domestic life (hopefully) gets more attractive and the novelty wears off.  Only a very few Managing Directors really sing out for the open road.

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It seems that Georges Elhedery isn’t one of them.  He is going to be spending “the early months” of next year based in Hong Kong, becoming the first HSBC chief executive to live anywhere other than London since Michael Geohegan in 2009.  And although there are presumably a lot of different factors that go into a decision like that, the one that people there appear to be talking about is that it will “cut down on a hectic travel schedule that requires him to fly out to Asia several times a year”. 

Not only that, by taking more local flights to visit Asian business units before the summer starts, it seems that Elhedery is hoping that he will be able to cut down on the long hauls later in the year too.  It seems he’s reached the stage of life at which carbon credits matter more than Airmiles.

What does it mean for business?  The rule for HSBC has always been that if the Bank of England is holding the main regulatory relationship (and therefore any too-big-to-fail liability), then they want to be able to get the top decision maker round to Threadneedle Street at any hour of day or night.  That might be less important in these days of good quality secure videocalling, but it’s still likely to mean that someone will need to be deputised to be “head of getting yelled at if something goes wrong”.

It's particularly important since HSBC runs a lot of its trading risk, and its group treasury out of London.  In fact a few years ago, when Georges Elhedery was head of markets, he seemed more reluctant than other top managers to join the “pivot to Asia” and relocate.  Admittedly, that was before the sabbatical which he spent learning Mandarin, a language which he’ll get opportunities to practice while HSBC integrates the Hang Seng acquisition next year.

For the bankers, though, this strategy has profound implications.  Notoriously, face-time with the boss is an incredibly valuable commodity, and it’s much more valuable later in the year, when bonus time is drawing nearer.  If Elhedery is planning to spend Q1 in Hong Kong, with the strong implication that he will be much more of a homebody in Q4, that’s great news for European bankers and much worse for everyone else.  Perhaps the environmental benefit of him taking fewer flights will end up being offset by HSBC employees from Asia finding excuses to take the overnight to London in December.

Elsewhere, it seems that some European heads of investment banking may have seen headlines about “hiring sprees” and “best bonus years ever” and realised that they might need to do a little bit of belated expectations management. Particularly at the bulge bracket American banks and at Jefferies, where hiring has been pretty strong already, the messages being sent out are using words like “selective” and “close to fully staffed”.

But this might be more for internal consumption than a realistic assessment of where the labour market is headed.  It’s true that European revenues have lagged other markets somewhat (particularly North America), and bonus pools are likely to reflect this.  But the outlook is still strong, and importantly, there are still plenty of employers just outside the top ranks who are still keen to grow. Deutsche Bank and UBS have plans to grow their market share, as does BNP Paribas.  And Mizuho and RBC are both targeting meaningful positions in a geography where they’ve hardly ranked up until now.

So there will still be alternative bids out in the market to keep pay up.  You might just have to swallow your pride and get over your ego in order to take one.

Meanwhile …

Mizuho continues to pursue its global ambitions, buying a majority stake in Indian investment bank Avendus for $523m.  The Avendus CEO, Gaurav Deepak, said that he expected that the new partnership would allow them to increase hiring in a number of sectors. (Reuters)

CLSA has been through some times, but its Australian operations are back on the front foot, with two senior hires just before the end of the year, and promotions apparently “flying around like confetti”. (AFR)

It’s not just AI – if you use a fairly loose definition, there are also bubbles in gold, bitcoin, Labubu dolls, high protein popcorn and celebrity podcasts.  Some of these seem intrinsically more likely than other to pop in the New Year, though. (Bloomberg)

Possibly the hottest market for a specialist advisory boutique is advising private equity investments in college sports.  Some former university sports coaches have reinvented themselves as investment bankers; others couldn’t take the pay cut. (Sportico)

Paramount is not planning to raise its bid for Warner Brothers, apparently, so although the bankers will have the holiday ruined, they won’t necessarily have anything to do. (NY Post)

There are few sensations in banking to compare with that of sacking a client.  Wealth manager Julius Baer is having a clear-out of its smaller and less profitable accounts.  They are apparently concentrating on those with complexity and political risk, but it’s quite likely that the bankers have quietly pushed some onto the list just for being annoying. (Bloomberg)

Apparently New York office workers, rather disgustingly, refer to the standard takeout order of protein, rice/pasta and salad as a “slop bowl”.  If you would prefer cacio e pepe or a Scotch Egg, here are some of the places they go for lunch when they’re feeling fancy. (Business Insider)

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