Top of the list, in GlobalCapital’s view, is Morgan Stanley’s decision to move two of its most senior debt bankers into investment management. While internal transfers aren’t always the hottest news, this could signal the way some banks are planning to revamp the more expensive parts of their capital markets operations, and boost the connections between wealth management and investment banking.
So, Claus Skrumsager, co-head of capital markets at Morgan Stanley, and Tom Cahill, head of asset finance, both join Morgan Stanley Investment Management as head of private structured credit solutions and head of opportunistic credit, respectively.
The exact job descriptions aren’t clear yet, but will involve raising and deploying funds in various illiquid credit opportunities further blurring the lines between regular banking, investment banking, private equity, hedge funds, and asset management.
When it comes to consumer asset financing businesses, these lines are already pretty blurred. The industry is already a choose-your-own-adventure combination of different licences, leverage in different formats, and portfolio ownership by firms with widely different legal structures and purposes.
But it still has banks at the heart of it, providing committed acquisition financing which, though lucrative, eats up risk weighted assets. With some firms – most notably Credit Suisse — committed to reinventing their investment banks as service providers for their wealth management division, perhaps this is how banks can go all the way with no money of their own down, but using their experienced origination people to put more exotic, illiquid and interesting opportunities in front of their investment management clients.
Skrumsager’s switch to the buy-side has prompted a round of promotions within capital markets. ECM head (and capital markets co-head) Henrik Gobel becomes sole head of capital markets across products, with Leo Civitillo, a banker with a derivatives background, becoming sole head of fixed income capital markets.
In EMEA, Piers Harris, who ran corporate DCM, gets the nod for overall DCM head, while Godel’s elevation means Martin Thorneycroft and Magnus Andersson gets expanded ECM management jobs.
The last week also brought full year results and bonus numbers from most of the big US firms and the surprise announcement from Deutsche that it was zeroing nearly everyone in cash terms for this year’s bonus round.
The big question for bankers reading the tea leaves for their own bonuses — European firms start offering firm figures from next week — is whether Deutsche’s move has any read-across, or whether it’s just an investor relations exercise.
Former DB boss, Anshu Jain’s “hunger march” for capital, after all, didn’t seem to result in much discernible discomfort for the firm’s bankers, or even much drawing in of horns in Deutsche’s profitable principal finance business.
Headhunters seem divided. Clearly, anything that normalises no bonus at all has a market impact, and business managers can probably discount the fear that a firm that can’t even pay its own staff will be prowling the Street with a fat chequebook looking to hire.
But at the same time, even Royal Bank of Scotland managed to keep a core of essential staff well looked after through its most troubled time, and even to hire expensively of late, through some form of human resources alchemy. Deutsche says next year will be back to normal, in any case and it would be foolish to bet against the firm’s ability to look after its top performers below the radar. Perhaps it’s just a way of trimming headcount without paying severance.
US bank bonuses have apparently also disappointed though, inevitably, those individuals that have been disappointed make more noise in the market and to recruiters than those that did well. Part of it, though, surely stems from the solid performances seen in bank results so far.
All the US firms beat expectations, and in large part, this was down to the much-reviled fixed income trading divisions, which were 30% up or more across the board. The right combination of a rallying market, a steepening yield curve, and a dash of political volatility meant credit could do well (price appreciation and enough stability to get difficult deals away) while rates did better still — as Marianne Lake, CFO of JP Morgan said, it’s much more interesting for clients to trade around a moving yield curve.
The good times look set to continue, as the benign environment feeds through to ECM and advisory, both of which lagged the Trump-inspired market rally — such deals take months to put together, so there simply hasn’t been the time yet since early November for investment bankers to catch up to their bond-trading brethren. ECM and advisory in the fourth quarter, indeed, saw double digit drops at most firms — but watch Q1 for more.
UBS is the first European bank to report full year 2016 numbers, this Friday. The market is doubtless expecting US and fixed income biased houses to do well (Barclays would be a solid pick) but even more interesting will be whether the Europeans have held their own in market share.