Morning Coffee: Goldman Sachs told its MDs to stop spending so much money. Deutsche Bank’s macro engine is sputtering
Being a managing director at Goldman Sachs is not as good as it used to be. When you're not worrying about your bonus, or your job, you should now be worrying about your expenses. And if you are not worrying about your expenses, the firm will make sure you do.
Reuters reports that Goldman MDs have been invited to meetings at which they have been informed that it is their duty to squeeze costs even more than before. New budget totals are being imposed; the MDs will be held responsible for meeting them.
The squeeze applies to everything from client travel to meals out and subscriptions. In the past, MDs could travel to meet a single client and expense a fancy meal; now travel must be justified by meeting multiple clients and expenses must be signed off by senior staff. Subscriptions that could previously be taken out almost at whim also now require prior justification.
There is always more that could be done, but it usually requires the squeeze to move down the hierarchy. Five years ago, Deutsche Bank caused a furore by depriving its bankers of free fruit. Meal stipends for working late can be cut. Taxis home from the office can be pushed to midnight instead of 10pm.
There comes a point, though, at which bleeding costs bleeds morale, and this is the awkward path that Goldman Sachs must tread. Its managing directors have good reason to heed the warnings: their numbers are already being culled again in Asia, and there is talk of further headcount cuts later this year.
Separately, Deutsche Bank's macro traders' good run is at an end.
For a bit, it seemed that the revamped DB macro desk was on an unstoppable updraft of exponentially increasing revenues. They more than doubled in the third quarter of 2022. For the year as a whole, they were up...400%.
Now, though, Deutsche's macro desk - which includes assorted traders added from the likes of Goldman Sachs and Morgan Stanley - is sputtering. Chief Financial Officer James von Moltke said yesterday that the bank's macro desks are seeing a "trail-off" and that this is contributing to an expected 15%-20% decline in second quarter fixed income revenues compared to the previous year.
It was probably bound to happen. However, if Deutsche Bank's macro revenues are declining, the same thing is probably occurring at macro-oriented banks like Barclays and BNP Paribas, and even at hedge funds with an historic macro focus (like Eisler, maybe). The decline also raises questions about the wisdom of the late cycle inflation trader hiring spree: now may not be the time to pay big guarantees to bring macro traders on board after all.
Meanwhile.....
A terrible thing allegedly happened when a Goldman Sachs partner was working from home. Adam Dell, the former head of product for Goldman's Marcus business, accidentally included a sexually explicit recording of himself to a junior as part of a work video after not realizing his camera was still filming. Both Dell and the junior left, and the junior received a payoff of millions of dollars. Goldman told Bloomberg its reporting was inaccurate, but didn't say how. (Bloomberg)
Mr Dell had a camera on for a work project but forgot to turn it off and recorded himself engaging in sexually explicit activities. (Telegraph)
Goldman Sachs and Citi are cutting 35 jobs across Asia this week. Citi is mostly cutting juniors. Goldman cut 15 dealmakers, including nine from equity capital markets. (Bloomberg)
Is Goldman Sachs' board losing faith in David Solomon? One unnamed Goldman insider thinks so. “The board is starting to re-evaluate. David may have a problem with the boardroom. No one wants to see someone is at war with their senior execs. You can ignore the bad coverage for a month or two, but the board no longer has plausible deniability about what’s going on.” (New York Post).
BNP Paribas still has big plans for its banking business in the UK. It now has 370 UK dealmakers, up 23% over the past five years. (Financial News)
UBS will retain 'a few hundred' private bankers at Credit Suisse in the APAC region. (Bloomberg)
Venture capital firm Molten Ventures has slashed the valuation of its stake in Revolut by 40%. (Financial Times)
Barclays' trader Akshay Niranjan claims his former friend, Goldman Sachs trader Brijesh Goel, gave him an insider trip at a squash court after drinking too much. (Bloomberg)
Pub group Fuller, Smith & Turner has hailed a rebound in activity at City bars, saying workers in the Square Mile are making the most of afterwork drinks during the warm weather and “enjoying being back” in the office. (Guardian)
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