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If you’re a pessimist you might presume it will be hard to find a banking job in London in 2019. After all, what with Brexit and the difficult fourth quarter, banks are surely reining in their spending. In some areas this may be so – recruitment firm Morgan McKinley estimates that new finance jobs in London fell 39% year-on-year in November 2018. But as we pointed out last week, banks should be shielded from the effects of Brexit (hard or not) until 2021, and recently advertised London jobs on their own websites suggest there’s no attempt to shift core jobs out of London yet.

Accordingly, if you’re a junior looking for a new investment banking division (IBD) job in London now, you could apply to Goldman Sachs, which has a vacancy for an associate on its natural resources team. Or, there’s JPMorgan, which has vacancies for both an analyst and an associate on its technology media and telecoms (TMT) team. If you’re looking for a vice president (VP) role, you could try Morgan Stanley, which this week began advertising for a VP on its London power, utilities and renewables team.

However, some of the most interesting London banking jobs in the dying days of 2019 are those in the teams that have come to the fore in the past 12 months: data and machine learning.

Accordingly, Goldman Sachs is looking for an analyst or associate to work as part of a ‘front-office machine learning strats team.’ It’s also looking for someone to work on an ‘Edge data engineering team’ which aims to structure and systematize Goldman’s use of its ‘data assets.’ And it has a vacancy for a natural language processing expert to work on the FAST team which aims to, ‘convert data-driven insights into action’ by creating analytics tolls for salespeople and traders.

Similar efforts are afoot elsewhere. JP Morgan is currently hiring a data analytics and machine learning associate or vice president for its rates team. The intention is, ‘to bring data-driven decision making and automation’ to the rates business. So far, the bank says it’s built a recommendation engine for sales and a natural language processing system for client and broker interactions. JPMorgan is also looking for a data professional to work on DealWorks, a team helping to automate the investment banking dealmaking process.

Not to be left out, Citi is hiring Java developers for its London innovation lab, which aims to ‘design, build and enhance high-performance, data-intensive applications and services for our clients.’ And Citi has a vacancy in its PhD-staffed ‘Scientific Implementation Group’ which applies a ‘systematic, quantitative, and scientifically informed thought process around execution, portfolio management, and risk management.’

2019 maybe be Brexit year for the City of London. It will also be the year of the data-led job and the quantitative-focused PhD.

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ExodusPoint has done it again. The hedge fund that won’t stop hiring is understood to have poached yet another portfolio manager in New York City.

The fund’s latest hire is understood to be Todd Brick, a portfolio manager and former director of alpha capture and data strategy at quantitative hedge fund Engineers Gate. Engineers Gate confirmed Brick’s exit, but neither he nor ExodusPoint responded to requests to clarify his destination.

Founded in 2017 by Michael Gelband, a former star fixed income trader at Millennium Management, ExodusPoint has been hiring heavily on both sides of the Atlantic this year. As we reported last week, it recently hired Stanislas de Caumont, a former global macro portfolio manager at Steve Cohen’s Point72. In total, Gelband has hired at least 30 people this year.

Brick and de Caumont will be in different offices, but may know each other already. The two men both previously worked for Steve Cohen’s SAC Capital at the same time. Interestingly, both are now at ExodusPoint instead of Point72.

Brick began his career at SAC Capital in 2004 and stayed until Cohen returned outside money after the fund plead guilty to insider trading charges in 2013. There is no implication that Brick was involved in insider trading whilst at SAC.

Brick spent around five years at Engineers Gate. The quantitative fund was founded in 2014 by Glenn Dubin, the co-founder and chief executive officer of Highbridge Capital Management. Engineers Gate has offices in New York, London and Mumbai and employs over 70 people globally, of whom around one third have PhDs.

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Job hopping may be rife in Singapore and Hong Kong banking, but it still pays to quit your role in the right way. The cities’ financial sectors aren’t large enough to guarantee that you won’t be working alongside your colleagues – or even your boss – in the future.

If you’re looking to move to a new bank after pocketing your bonus in early 2019, here’s how to leave in style.

Meeting first, letter second

In the job-hopping world of Asian financial services, too many bankers treat resignation as an impersonal box-ticking exercise. But you should never just hand over a formal resignation letter up front – always have a one-to-one talk with your boss first, says Farida Charania, group CEO of recruiters Nastrac in Singapore. “Tell your manager before you send the letter, and agree on a date of release.”

Show some appreciation

Your boss may view your departure as a loss of face – a personal affront to their leadership – so try to allay these fears when you meet. Managers tend to feel defensive about resignations, explains Daniel Koh, a psychologist at Insights Mind Centre in Singapore. “Show your appreciation for your boss toward the start of the resignation meeting and make them feel they’re not at fault – point out the learning opportunities they’ve given you, for example,” he adds.

Don’t debate

If your manager chooses to challenge your resignation with some aggressive questioning, it’s best not to get involved in an argument – neutral responses work best. “You can’t stop what others say about you – it’s how you react that’s most important. Reinforce that you understand their situation, but if they’re still very aggressive, it’s best to acknowledge how they feel and then walk away,” says Koh.

Kill the counter

In the current job market in Asia, it’s likely that you will get a counter offer. Don’t let this delay your resignation – prepare your response in advance so you can politely cut the counter dead in its tracks, says Charania. “It’s good that the bank is trying to retain you, but it’s not good that they counter only when you want to leave, so stay firm but cordial,” she says.

Stay impassive

Dwelling on negative reasons for leaving isn’t advisable, especially in comparatively small markets like Singapore and Hong Kong where many people in the finance community know each other. “Even if your boss is the main reason you are now leaving, don’t bring out all your negative emotions during your departure process,” says Angela Kuek, director of search firm Meyer Consulting in Singapore. “And don’t complain to HR or colleagues about your boss either. By staying impassive, you’ll also not be emotionally drained during the exit period and this will help you stay focused when you join your new firm.”

Ease the pain

Do whatever you can to ensure a smooth transition. Don’t just focus on business-as-usual work during your notice period, provide a handover schedule of outstanding issues, says Adrian Choo, a business development director at Lee Hecht Harrison in Singapore. Fabrice Desmarescaux, managing partner for Southeast Asia at Eric Salmon & Partners, adds: “Think hard about how you can help. Can you stay until you finish an important project? Can you help identify a replacement? Make sure your manager doesn’t lose face during the handover and remember my number-one rule: assume you will deal with these people again – someday, somewhere.”

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There is a paradox of cost cutting exercises, which is that they tend to over-deliver on the headcount reductions. If you fire 10% of your staff, then you will typically find that another 10% leave. This would be good news for cost cutting managers, except that the 10% who leave tend to include many of the ones that you wanted to keep. As soon as a headcount reduction is rumoured, sensible bankers will start feeling out the market to see what their options are if the worst comes to the worst. And once a resume is out there, it’s out there; strong revenue generators will always find a bid somewhere, and it’s likely that the external bid will seem a lot more attractive than hanging around in an office that appears to have developed sick building syndrome.

We’re talking about Deutsche Bank, of course; in this case, specifically its Asian operations, where something like 30 per cent of the workforce as of May this year are no longer there. The bank has lost fifty front office staff in Hong Kong and Singapore, including eight MDs and a dozen Directors, and replaced them with 35 new hires, who are in general much more junior – only three MDs and one Director, according to one source.

“Juniorisation” has been a trend in several parts of the industry over the last year, but it’s doubtful that this is what’s going on in DB Asia. At least twenty of the departures in Hong Kong went to rival banks including Credit Suisse and Natixis. It’s more likely that the majority of the departures were not planned, and that Deutsche has been scrambling to fill roles with a combination of trading-down in the job market and internal promotions. There’s not much else that can be done in the space of six months.

Looking into 2019, however, this may be setting up some interesting hiring opportunities. Christian Sewing has pledged that Deutsche will remain strong in Asia, and has specifically committed that it will not be leaving any Asian market where it currently has a presence. Assuming that commitment is still valid – and that the CEO turnover slows down to the extent that Sewing is still able to deliver it – Deutsche is likely to find itself in the same position in Asian IBD that it has in EMEA equities. That is to say, with a franchise that has been badly damaged by the cost cuts (Deutsche has not lost fee market share yet, but it seems likely for the near future), and needs to be rebuilt. In situations like that, investment banks tend to pay over the odds to recruit franchise players.

What does that mean for the juniors? Basically, there is a short window in which to shine. There will be employees at Deutsche in Asia who have enjoyed the equivalent of “a bloody war and a quick promotion” into roles they might have had to wait awhile for if the top level turnover hadn’t been so fast. But next year is likely to see management wanting to make franchise hires into those very roles, which is an awkward situation to be in.

Morgan Stanley, meanwhile, appears to have the opposite problem to the one that JP Morgan was talking about yesterday. Rather than too many bright ideas leading to a plethora of half-built systems that never go anywhere, MS has found that it’s too difficult to get new ideas off the ground, particularly if they involve collaborating with an outside fintech company. They’ve reduced their vendor agreement from twenty pages to a single page and set up an internal portal to allow employees to trial new tech. Shawn Melamed, the head of technology business development and innovation, used to run a fintech startup himself and so he’s aware of how difficult big regulated institutions can be to deal with.

The position that Stanley is in is somewhat different from JP Morgan; the overall bank strategy isn’t based on being a payments behemoth, so there is less need to focus on scalable and bank-wide platform solutions and more opportunities to customise products to individual client groups. It is interesting though, that while JPM views IT execution as the art of saying “no”, MS is still keen to let flowers bloom.

Meanwhile …

Closing the books at the year end brings something of an ominous feeling to anyone who has a derivatives position or loan that they had spent the last few weeks hoping it might get better. In two weeks time, things will need to be justified to outsiders and the benefit of the doubt will be in short supply. For this reason, we seem to be seeing a spate of announcements of trading losses, as banks get out in front of the curve and clear the decks for the FY results. Natixis, for example, has declared a €260m loss on hedging issues in Asian retail derivatives, while Citi is reorganising its prime brokerage business after a loss on lending to a hedge fund which is reported to be as much as $180m. If you have any positions you’re not happy with, remember that there are only five trading days left in the year, and if it hasn’t come right by now, it probably isn’t going to. (Reuters)

One of the odder insider trading cases the SEC has brought – the husband of a UBS M&A banker is being sued over allegations that he eavesdropped on his then-fiance’s phone calls and used the information he gleaned to make profitable options trades. The wife was apparently unaware (Bloomberg)

Guzman Carles might be an important man in Europe next year; he has been promoted into Stephen Carter’s role as head of EMEA FIG M&A, going into a year when considerable consolidation is expected (Financial News)

“Coporate broking”, the strange mix of advisory, investor relations and stockbroking, is a peculiarity of the UK market which everyone expects to wither on the vine, but which never seems to go away. Euromoney surveys the outlook (Euromoney)

As well as plugging gaps, Deutsche seems to be hiring to reinforce its strengths; after a good year for its software investment banking team, they have hired Greg Thorne from Stifel as a managing director (Business Insider)

French labour laws are easy to mock, but this week (nearly ten years after the event), an appeals judge ruled that SocGen was within its rights to fire Jerome Kerviel and does not have to pay him €450k compensation (Reuters)

The private equity investment boom in vegan food companies, complete with borderline unforgivable puns (Bloomberg Businessweek)

And ARM plc have invented a computer chip that will sniff your armpits, if that’s what you want. (New Scientist)

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A career in banking technology can seem like a safe and secure path. – Less volatile than hedge funds with their hire and fire mentality, and much less likely to fail than fintech start-ups who rely almost solely on VC money. At a bank, however, you are typically dealing with enormous amounts of money. The revenue of a single trading desk or investment banking team is often far greater than the total cash-flow at a well-established FinTech. And when things go wrong, which they inevitably will, the losses can be eye-watering and sometimes career ending.

Everyone knows the infamous 2012 Knight Capital case, where $461m of losses stemmed from sending erroneous orders out to the market. This was caused by, among other things, an individual not copying new code to just one of eight production servers. A similar incident happened at Goldman Sachs in 2013 – the SEC report into it gives a fascinating insight into just how lax controls were in SecDB at the time. I have some inside knowledge of this incident – and four engineers were fired in pretty short order. Controls in SecDB were tightened up – whereby code could no longer be released without peer review. But just one year later, the old CTO Steve Scopellite was gone and the strats organisation had to all intents and purposes taken over technology. So, the message here is that even if you’re not directly responsible for something going wrong, it can still have massive consequences on careers.

Personally, I’ve released code with bugs that has cost a trading desk six figures through mis-pricing. The client in question probably couldn’t believe their luck. The first time you’re going through an incident like this it can be frightening, and therefore I’ve detailed below the steps you can take to manage your reputation and image. We all develop code with bugs – it’s unavoidable and particularly likely in a fast-paced environment where there are expectations around productivity. But you are also at the mercy of the wider change and release processes.

So, when you make a mistake in your banking technology job – which you absolutely will, there are a few things you need to do. Based on my own long experience in the industry, this is the playbook you need to follow.

1. Own up straight away. Don’t hide anything, you’ll only make it worse. The focus should be on escalating and getting help.

2. Try and lead the response. Fixing the issue in the timeliest manner possible, dropping everything else until this is done. Framing is important here – yes, you or your wider team caused the problem, but if you are instrumental in fixing it then that gets you some points back.

3. Over the course of the next few weeks, analyse and refactor the test suite of the application to try and avoid this type of error happening again. Metrics are useful here – if you introduce user interface tests, or significantly increase test coverage, then those are numbers you should give to the business and tech management.

4. If there was a control failure, lobby for a change in the process and implement it if possible.

5. If the business has lost millions, crack open your CV and start ringing around recruiters. Even if you don’t get fired, you have just lost so much career capital that it won’t be worth staying.

Joe Piccolo is the pseudonym of a technologist working at a leading U.S. bank

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The question: “I’m an experienced quant at an international bank in London and I’m looking for some advice as I prepare to move jobs.

I’ve interviewed with a large European bank and have been offered a role. I like the bank and I like the job, but I’m annoyed by their tactics. – They’ve made it clear that their compensation offer is take it or leave it, even though it’s barely better than the package I’m on now.

The real issue is the vacation time. My current bank is generous when it comes to vacations; the bank I’m joining is not. I think they need to increase their pay package to reflect this. However, they’ve made it clear that they’re unwilling to discuss vacation days, base salary or bonus. – All aspects of their offer are final.

I haven’t been on the market for a while and have never experienced this kind of approach before. Is it normal? What am I suppose to do? In this case, does non-negotiable mean negotiation is still possible? I’m working with a recruiter but he seems to be out of his depth and has simply offered to schedule a meeting with the MD so that we can discuss, “my fears.”

Any advice would be greatly appreciated. My instinct is to go out and find another job offer with higher compensation and to then communicate this to the inflexible bank in the hope that they’ll budge. Is this a bad idea?!”

The answers: “Whatever you do, don’t threaten them with another job offer,” says Christian Robbins, a headhunter at Tradestone Search in London. Doing this would send the wrong signal, Robbins adds: “Salary should only be one element of your decision to take a job – ultimately it should be more about whether the role is right for you, not about how much you’ll get paid.”

Both Robbins and another headhunter, speaking off the record, say the package probably is negotiable. “Non-negotiable means, ‘We warmed to you and will respond if you come back with a demand that’s only 10-15% higher than the package we’ve suggested,” says Robbins. “- They’re simply saying you can’t come back demanding a ridiculously higher price.” The other headhunter says this approach isn’t normal: banks will usually negotiate, unless their budget is tight and their hands are tied.

“Come back to them with a well thought out case pointing out what you can for the bank and how much the market rate is for your role,” says Robbins. “Don’t just say, “I want this” – you need to justify your worth to them.”

If you have any advice, please add it in the comments box at the bottom of this page.

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A former distressed debt trader at Citi has returned after a very short stint at Goldman Sachs. While the time away from Citi was brief, it was also likely very profitable. Peter Hall, who left Citi as a director in April to join Goldman Sachs, rejoined the firm earlier this month as a managing director.

Hall spent nearly eight years as a distressed debt trader at Citi before jumping to Goldman Sachs earlier this spring. Interestingly, this isn’t Hall’s first stint as a managing director. He joined Cantor Fitzgerald as an MD in early 2009 but left to join Citi as a director less than two years later, according to LinkedIn. Hall cut his teeth at Lehman Brothers until the financial crisis swept the firm away. Goldman Sachs and Citi declined comment. Hall didn’t return a request for comment.

Distressed debt has been one of the hotter sectors in 2018, but more so on the buy-side. At least eight new distressed funds raised a record $2.2. billion on average during the first half of the year, according to the FT. BTIG this week announced the hiring of Michael Carley Sr. the former co-head of global distressed sales, trading and research at UBS.

Despite complaining of a weak fourth quarter in which margins are being compressed (possibly due to a $180m loss relating to an Asian hedge fund), Citi has been building out its markets business. The hire of Hall comes just a couple weeks after Citi nabbed one of New York’s top equity derivative heads. Jason Cuttler joined the bank last month as an MD following two years at J.P. Morgan and another 15 at Goldman Sachs, where he was the global head of the bank’s tactical equity derivatives strategy team. Two impressive coups by Citi. The bank promoted 175 people to MD last week, but Hall and Cuttler weren’t included on the list as they are considered new hires.

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While overall headcount in banking for 2018 has likely remained neutral, if not down a bit, banks have been extremely aggressive this year when it comes to the recruiting of MD-level talent. In a departure from the norm, many firms are actually still hiring senior bankers this late in the year, accepting the fact that they’ll likely need to match bonuses that would have been paid out by previous employers. The tighter job market has certainly made for an interesting year.

Looking back on 2018, we put together a list of ten key hires that have the potential to be game-changers, both for new and old employers. Some names are bigger than others, but the fallout from each hire should be significant. Most will have a direct impact on hiring plans in 2019.

Apoorv Saxena, global head of AI technology at J.P. Morgan; Manuela Veloso, head of AI research

In the midst of an arms race for artificial intelligence experts, J.P. Morgan successfully lured away one of Google’s best AI minds. Hired in late August, Saxena is actively building up an AI team in the Bay area. He took no time putting his stamp on the new role, poaching an AI engineer from Facebook in his second week on the job. The bank also hired Manuela Veloso, head of the machine learning department at Carnegie Mellon, to lead its AI research initiatives. J.P. Morgan has been pouring money into artificial intelligence and machine learning as it begins development on its new fintech campus in Palo Alto, California, conveniently sandwiched right in between the campuses of Google and Facebook.

Beyond his engineering skills, Saxena should give J.P. Morgan a better chance to compete over tech talent given his background at Google, where he was the head of product management for cloud-based AI. Perhaps more important, he’s the co-founder of the AI Frontiers Conference, which brings together the most influential voices in artificial intelligence. Past sponsors include Google, Microsoft, Facebook and Amazon. This year, J.P. Morgan was the diamond sponsor. Combine his network with that of Veloso and you’re looking at a recruiting duo to be reckoned with.

Greg Guyett, co-head of global banking at HSBC

Some may call it an emergency hire. The move came on the heels of a now-infamous September memo in which anonymous current and former senior bankers eviscerated global banking head Robin Phillips, noting that he “utterly failed to create a successful strategy which would have even a chance of succeeding.” The memo, sent to HSBC’s CEO and chairman and leaked to the media, called for the ousting of Phillips, who still remains with the bank. But he’ll no longer be the only one running the show at HSBC’s investment bank. Guyett, a 30-year veteran of J.P. Morgan, was hired in October, pending regulatory approval. There has been a lot of turnover at HSBC’s investment bank in recent months, particularly in M&A. Expect more to come with a new co-head in place.

Chris Gallea, vice chairman of investment banking at Goldman Sachs

One of the main takeaways from 2018 at Goldman Sachs is that the bank appears more willing to bring in outsiders at its highest rank. One of those was Chris Gallea, the former top industrials banker at J.P. Morgan who joined Goldman Sachs as a partner in May in New York. Gallea was immediately elevated to vice chairman of Goldman’s investment bank, a key role within the firm as new Chief Executive David Solomon takes the reins from former CEO Lloyd Blankfein, who was known more for his affinity for sales and trading. Gallea brings with him a loaded rolodex of clients, including United Technologies and Emerson Electric, according to the Wall Street Journal.

Sam Wisnia, Eisler Capital

The former head of rates and foreign exchange at Deutsche Bank, Wisnia joined the $2.6 billion macro fund in March. Wisnia was a key hire at the time for Deutsche Bank, who promoted him only last year in the hopes he would build up a team of strats as he did at Goldman Sachs earlier in his career.

For Deutsche Bank, the significance of Wisnia’s departure goes beyond his reputation as a brilliant quant. Just a few months after leaving the German lender, Wisnia poached a seven-person team to join him at London’s Eisler Capital. Included in the haul was Angelo Haritsis, the ex-Goldman Sachs MD who had been leading Deutsche’s fixed income strats function, along with at least six other director and vice-president-level quant specialists. Wisnia was brought to Deutsche Bank to build a team. After a few short years, he seemingly left with much of it.

Charles Elkan, global head of machine learning at Goldman Sachs

J.P. Morgan isn’t the only one robbing artificial intelligence talent from Silicon Valley. In March, Goldman Sachs hired Elkan away from Amazon, where he was leading the Web giant’s central machine learning team. Like Veloso at JPM, Elkan has spent the vast majority of his career as an academic. He became one of the bigger names in machine learning and AI at the University of California, San Diego while doing consulting work for companies like Netflix. Now he’s leading Goldman’s AI strategy.

Navtej Bhullar, global co-head of healthcare M&A at Deutsche Bank

Bhullar’s November hire is particularly noteworthy considering Deutsche Bank has been taking a knife to its investment banking division during the second half of the year. Bhullar spent the last two years at Lazard in New York after working for more than a decade at Goldman Sachs, eventually making MD and helping to lead its healthcare coverage in the U.S. and Canada.

Bhullar may not be the biggest name to switch firms this year, but his hire underscores comments that we’ve heard from recruiters in recent weeks. Despite all the news clippings surrounding layoffs, Deutsche Bank has been selectively recruiting senior bankers and traders in the U.S. as of late. Overall headcount is shrinking, but the German bank is remaining active as it searches for fresh blood.

Gregory Berube, senior managing director at Evercore

Berube came over from Goldman Sachs in May to help lead Evercore’s restructuring and debt advisory group in New York. He was named head of restructuring in the Americas at Goldman just last year when former global head Roopesh Shah left for, you guessed it, Evercore. Both hires show just how dominant boutique investment banks like Evercore, Lazard and PJT Partners have become over the last few years in debt restructuring. Boutiques now get the lion’s share of work as clients look to avoid potential conflicts of interests that can come with big banks. This has resulted in a constant game of musical chairs with senior restructuring bankers, which the boutiques keep winning.

Mark Manduca, managing director, equity research at Citi

Citi’s hiring of Manduca was interesting for two reasons. First, the former Bank of America MD was the highest-voted analyst of any sector in the latest European Institutional Investor Survey, leading research of transport, leisure, autos and business services, among others, according to Financial News. Second, many banks in Europe have cut back on equity research staff following the implementation of Mifid II. Perhaps seeking a market opportunity, Citi has gone the other way, adding a host of senior research analysts in London in recent months. Citi seems to have gotten one of the best with the poaching of Manduca.

Neil Chriss, Millennium Capital Management

Goldman Sachs veteran and founder of recently-defunct hedge fund Hutchin Hill Capital, Chriss didn’t stay on the sidelines for too long. The famed mathematician partnered with Millennium in September to build out a new quant trading business that has since been dubbed Omnis Quantitative. Chriss has made at least one confirmed hire so far but is said to be having talks with other quant researchers and technologists. The hedge fund giant has also been doing plenty of hiring on its own outside of its relationship with Chriss.

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As a proud alumnus of Goldman Sachs, I am angered by the 1MDB scandal. I am even more angered by the inadequate response from senior leadership.

Leadership, led by CEO David Solomon, continues to exhibit an complete inability to organize a coherent and effective response to media scrutiny. Today, I therefore see troubling signs that Goldman Sachs has learned very little from the financial crisis.

After making comment about doing “God’s Work” in 2009, Lloyd Blankfein’s performance at a 2010 Congressional Hearing did extensive damage to the firm’s reputation. Lloyd was combative, focused on arguing the minutiae of market making, and refused to take any responsibility for the the financial crisis. He came off arrogant and solidified Goldman’s position at the most hated company on Wall Street.

Eight years later, David Solomon sent a widely publicized voicemail to his employees, evading any responsibility for 1MDB. He pinned the blame on rogue employees and conveniently seemed to forget that 1MDB happened under his watch in the very division he managed.

It’s since been reported that despite some objections from compliance, 1MDB passed through supposedly robust safeguards and checks, was ultimately was approved by a committee chaired by the firm’s current CFO Stephen Scherr.

While the employees driving 1MDB may have been ‘rogue’, the approval process certainly was not. The Wall Street Journal reported that Goldman decided to proceed doing business with 1MDB despite suspiciously high fees and despite other firms passing because they suspected fraud.

Wall Street gives advice on corporate governance to other sectors but rarely heeds it. Imagine for a moment, if 1MDB happened in any other sector. If the actions of a business led to billions of dollars of fines, criminal investigations, and civil investigations across multiple continents, what would happen to the executive who ran that business? What would happen to people who approved those deals?

Goldman Sachs stock is down roughly 30% since the scandal, wiping out $30bn of shareholder value in the process. Yet, Gregg Lemkau, the co-head of Investment banking, was on CNBC this week to saying that Goldman Sachs employees don’t focus on the stock price and joked the flip-side is bankers will now get cheaper stock at bonus time. Both David and Gregg’s actions remind me of the arrogant and tone deaf comments that Lloyd made a decade ago.

Mr Lemkau, $30bn of wealth has been wiped out from pensions, endowments and individuals that own your stock. They don’t get equity awards on the cheap. They don’t have millions of dollars of savings like you do.

Time and again, Goldman executives refuse to hold themselves accountable and make comments that show they still ‘don’t get it’

The culture must change. Change comes from the top. Senior management needs to change.

This piece was written by anonymous Goldman Sachs alumnus and reflects his subjective opinions, which are not those of eFinancialCareers

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Perhaps the biggest drama surrounding Bank of America this year has concerned its investment bank, particularly in M&A. Reports began surfacing early in the summer that investment bankers had grown frustrated with the firm’s perceived shrinking appetite for risk-taking. The alleged internal squabbling about the bank’s conservative approach coincided with BofA’s precipitous fall down the M&A league tables and the resignation of investment banking chief Christian Meissner, among other defections.

While discussing the firm’s investment banking strategy on Thursday, CEO Brian Moynihan acknowledged that some deals may have been left on the table, though likely not in the way some of his critics would have hoped. “What we figured out is we wanted to be careful in client selection around the world, [but] we forgot in the United States we need to cover every client,” he told Bloomberg. “That’s the expansion that we probably got a bit too careful on.”

The comments are interesting because much of the reported internal grumbling was about ignoring opportunities in overseas markets. Moynihan appeared to stand behind that strategy, instead pointing the blame on a lack of in-depth domestic coverage. “We lost some share in mid-size client M&A deals in the United States. We shouldn’t do that – and the team saw that, and that’s what they’re after,” he said.

What remains unclear is who dropped the ball. Was it an issue with top-down strategy or were investment bankers chasing their tails overseas on their own volition, only to find the bank had little interest in emerging market deals? Either way, the disconnect seems to be remedied. “We switched leadership to start to drive the business deeper in the U.S.,” Moynihan said. Bank of America is actively hiring new investment bankers with a focus on the middle-market, he added. Fresh blood is certainly one way to make sure everyone is on the same page.

Elsewhere, KPMG has instituted a new policy that many employees feel is rather draconian. The firm told its U.K. employees that they will be fined £100 if they are late in submitting their time sheets. Some angered staff told the FT they feel as if they’re being treated like children by an overbearing parent. KPMG won’t be keeping the fines – they’ll come out of individual bonuses, leaving more of the pool for punctual staff – but that hasn’t appeared to palliate the irritation in the firm’s large consulting team.

Meanwhile:

European regulators suspect Deutsche Bank, Credit Suisse, Credit Agricole and one other major bank colluded to manipulate the government-backed bond market. The European Commission didn’t name the banks, but the three aforementioned firms acknowledged they were among the four. The banks now have a chance to respond before any potential fines are levied. (WSJ)

UBS Chairman Axel Weber reportedly prefers an outside candidate to eventually replace CEO Sergio Ermotti. The Swiss bank is said to be ramping up its succession planning, though Ermotti could remain in the role for another two years. (Bloomberg)

The six big U.S. banks are on pace to book a combined $119 billion in profit, easily surpassing the 2016 record of $93 billion. But bankers are reportedly not all that jolly as they break away for the holidays. Frustration over their bank’s spiraling stock price is said to be a major factor, as is the realization that another round of corporate tax cuts that buoyed the industry this year isn’t on the horizon. (Bloomberg)

Global M&A revenue has already hit a 10-year high. Numbers are actually down from last year in the U.S. but London bankers have picked up the slack. (Financial News)

Citi has told its hedge fund clients that it is tightening its prime brokerage services and overhauling management after it lost $180m when one Asian client’s emerging-markets bets went south. (FT)

Former Deutsche Bank executive Stuart Bray has been accused by a U.K. judge of using his tiger conservation charity to hide funds during his long-running divorce case. The judge also accused Bray of making “childish and facetious” comments during the hearings. Bray said (jokingly, we assume) that he “might be able to make money as a drug dealer” due to his expertise in chemistry. (Bloomberg)

In a statement announcing a $15 million fine related to Barclays CEO Jes Staley’s attempt to unmask a whistleblower, New York regulators released another previously unreported allegation – then deleted it three hours later. The New York Department of Financial Services originally said that the whistleblower also alleged Staley was removed from management at his former employer, J.P. Morgan, because he offered preferential treatment to executive Tim Main, who was a personal friend. Main, who eventually joined Staley at Barclays, was the target of the anonymous Barclays complaint that sent Staley on the hunt for the whistleblower. (Bloomberg)

A London banker who was last contracting for TD Bank has been found guilty of murdering an escort. Zahid Naseem is said to have struck the victim 13 times on the back of the head with the large black ceramic kitchen utensil. (The Independent)

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““

If you’re working in finance and are based in Europe, you are probably either on your Christmas break already, or are preparing for two weeks off starting from Christmas Eve. ‘Tis the season, and the season is one of eating and drinking rather than sitting in the office and working. For U.S. finance professionals, who typically have less time off, it can all seem rather – well – ‘indulgent.’

However, one category of person in the London banking world gets even more time off than others at Christmas. If you’re a contractor, you have probably been absolved from toil since the start of December and you won’t be going back until the New Year is well underway.

Contractors’ month off at Christmas is known as the ‘furlough’ and is enforced by most banks. “There are a few reasons for it,” says one seasoned contractor, speaking off the record. ” – The financial year end for most banks is in December, so it’s a way of saving money. It’s also unnecessary to have contractors in the office because there’s usually a change freeze, which means no new IT releases are made over the Christmas period in case things screw up. Plus the permanent staff all have backlogged holiday, so there’s no need for us to be around.”

The upshot is a mandatory four weeks out of the office. At most banks it’s been going on for at least five years. At others it’s a newer innovation – Standard Chartered CFO Andy Halford suggested mandating that Standard Chartered’s contractors take December off in the cost cutting email he sent in October, for example.

While a full month without work might sound like a boon, it’s also unpaid. This can cause issues for contractors that haven’t budgeted carefully. “Too many contractors in banking only have cash in the bank to cover three months,” says one contractor. ” – This isn’t enough nowadays.”

He says the most diligent contractors spend December, ‘building up their skills to stay current.’ Another long term contractor says this isn’t really necessary: “Personally I love the furlough because it gives me an excuse to stop work for a whole month at Christmas.”

In theory, banking contractors in London should be working harder this year because of Brexit. In reality this doesn’t seem to be the case. “The furlough was raised as a risk with Brexit preparations,” says one. “But Brexit doesn’t seem to have made much difference.”

““

As it turns out, hedge funds employees who work the hardest don’t always get paid the most. Our recent ranking of hedge funds based on working hours doesn’t match up all that well with those that pay the best, though there are a few exceptions.

The rankings below come from a recent Wall Street Oasis survey that asked employees how their compensation compared with similar jobs elsewhere, so it touches both on how much employees bring home as well as how satisfied they feel compared to those working at other funds. The data doesn’t include specific salary and bonus figures as it’s fruitless to compare compensation totals across different levels of experience (and there are never enough data points from every firm at each rung of the ladder).

As you can see below, the biggest names in the industry dominate the top half of the rankings, with Citadel and D.E. Shaw leading the pack. Analysts at Citadel can earn nearly $150k plus an average bonus of around $80k, according to WSO.

If the rankings say anything, it’s that longevity and strong pay are directly correlated. Citadel and D.E. Shaw were each founded over 30 years ago; Bridgewater has been in business for more than 40 years. The “youngest” firm in the top five is Steven Cohen’s Point72, which launched as SAC Capital back in 1992.

The rankings also include several big quant funds, such as D.E. Shaw, Two Sigma and AQR Capital. Many of the other top firms are multi-strategy funds that have been furiously adding more quants, including Millennium and Point72.

The chart below contains the top 30 hedge funds as well as a few of the bigger names that fell lower down the list. Nearly four dozen hedge funds were accounted for in the study.

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““

Today is the winter solstice in the northern hemisphere. The spring equinox is in three months’ time, on March 20th. If you’re a banker at Goldman Sachs, these could be three months of uncertainty and trepidation.

The source of worry is the ‘front to back review’ of the bank’s businesses, which was started in October 2018 by new Goldman CEO David Solomon and his new chief financial officer, Stephen Scherr. In November, Scherr said the results will be announced in the coming spring.

Why is the review necessary? One senior Goldman banker says it isn’t: “Trust me, this is just the same thing that happens every year,” he says. “It’s an annual exercise to make sure that those who are dragging down the return on equity are prepared for a bad bonus, irrespective of how well the firm performed. – And that they work harder next year.”

The review is part of Goldman’s “optimistically paranoid” stance, he says. “- There’s just more hype around it this year because of the new CEO.”

Even so, it’s hard not to feel that this year’s review could lead to harsher actions than usual. Scherr said in November that the firm is taking a forensic look at the revenue potential of each business and comparing this to its expense base before “coming to an assessment very clinically on whether that business is meeting its cost of capital.” Scherr didn’t say so explicitly, but the implicit threat is that business lines which don’t meet their cost of capital will be closed after the equinox in March.

Which business lines? Goldman didn’t respond to a request to comment on the review, but it doesn’t take a genius to see that fixed income currencies and commodities (FICC) professionals are in the firing line. After a dreadful 2017, FICC seemed to recover its mojo in the first quarter of 2018. However, the third quarter was weak again, with Goldman FICC revenues falling 9% compared to the third quarter one year earlier amidst complaints of low volatility and, “significantly lower net revenues in interest rate products.”

It’s not a good time for another weak quarter in FICC. Under Goldman’s former CEO (Lloyd Blankfein) and former CFO (Harvey Schwartz), the fixed income business was somewhat protected. Both Blankfein and Schwartz had markets backgrounds before assuming executive roles, and Schwartz said repeatedly that Goldman would not pull back from FICC due to a poor year or a few poor quarters because the firm, saw the “value of having a diversified set of global businesses,” and the “value of being a leader in these businesses.”

That was Schwartz’s stance in 2015. Four years later, the fear is that Solomon and Scherr – who are closer to the investment banking division than to securities – will not be so patient with the FICC franchise. The information accompanying Scherr’s November presentation helps explain why.

Under Goldman’s current strategic plan – set out by Schwartz in September 2017, the firm is pursuing an additional $1bn in FICC revenues by 2020. Scherr’s November presentation suggests that the firm is less than a third of the way towards this goal and that FICC is further behind its target than any other GS division. The chart below, from banking analysts at KBW, summarizes the current state of play (as of November) and reflects KBW analysts’ skepticism that the $1bn FICC target can become a reality.

KBW’s chart on Goldman’s 2020 revenue targets, progress so far, and expected success (or not)

Goldman Sachs review FICC

Source: KBW

For the moment, there is no indication that Goldman shares this skepticism. During his November presentation, Scherr said Goldman was tracking ahead of its targets for the business as a whole and might even increase them. However, there were also intimations that all is not entirely going to plan – particularly when it comes to increasing Goldman’s penetration of historically under-serviced client segments.

As the chart below shows (based upon Schwartz’s presentation in September 2017 and Scherr’s in 2018) Goldman has made no progress at all in increasing the share of its FICC business that comes from corporate clients. This – together with increasing interaction with asset management and banking/brokerage clients – was a key aim of Schwartz’s strategy, which portrayed Goldman as over-reliant on fickle hedge fund clients who don’t trade in difficult markets. By shifting the business towards corporate clients who trade no matter what, the hope was that revenues in Goldman’s FICC franchise would become more stable. Instead, the share of business does with corporates has fallen.

If this sounds gloomy, it surely is. Picking up corporate clients was never going to be easy for a bank without a large corporate lending arm, and Goldman’s failure to make headway suggests it’s struggling. Accordingly, a resurgence of the sort of ‘bad volatility’ that encourages hedge funds to sit on the sidelines isn’t going to help.

Things may not be that bad. Goldman’s FICC revenues rose 18% year-on-year in the first nine months and Scherr may yet look kindly upon the division in his review. If he doesn’t, and if return on equity is the yardstick of success, one Goldmanite suggests some areas are much stronger than others. “It’s all about return and capital used,” he says. “Returns are a function of whether the markets moved and whether we got the right side. The best opportunities this year have been in equities, commodities and emerging markets, while FX and rates haven’t seen too much movement.” At the same time, he says the most capital intensive areas of the securities business are (in declining order), credit, rates, commodities, emerging markets, FX and equities.

In other words, if you work in Goldman’s rates business you might want to spend lightly this Christmas. Early 2019 could bring some unpleasant surprises.

““

With the nights at their longest and the mornings at their darkest, this time of year has many bankers feeling the stress even more than usual, particularly if deal timetables or market volatility mean they’re not getting much of a break. The Weekend FT had a long piece on how to avoid burn-out at this time of year, written by Josh Cohen, a literature professor and psychoanalyst. One of the case studies he wrote about was of a young banker who found that one day, when the alarm went off at 5.30am, he didn’t get up for the office as usual, but spent six hours in bed before heading off to the supermarket to start binge-eating comfort food.

“Chris” (not his real name, and several other characteristics might have been anonymized) came to see the therapist a few months later, overweight and clearly not taking good care of himself. He proceeded to rattle off a set of practically textbook symptoms and causes of a stress-induced nervous breakdown. A spectacular early record of success, with top universities, sporting achievements and recruitment out of business school into a prestigious position. Promotions and bonuses, leading to a work regime of 90-hour weeks. And then gradual drift into spending hours gazing semi-consciously at a screen, anxiety sweats and detached conversations, followed by the (literal and metaphorical) five-thirty wake-up call.

What seems to have gone wrong for Chris in this story is that he had never really known what he wanted, so he was never going to know what was enough to achieve it. Like many bankers who burn out (and, it’s fair to say, many at the top levels who don’t), he was entirely motivated by external measures and status. The eventual crisis was triggered by his body and mind giving up under the pressure, but the underlying cause was the same thing that drove him to the doughnut shop – something inside him was demanding to be fed. He only started getting better when he began to realize that he needed to choose his own directions; as he said, “for the first time in my goddamn life, I took a walk without knowing where I was going”.

One of the early signs that a banker is heading for burn-out is when they’re described by colleagues as “taking it all a little bit too seriously”. The advice from Josh Cohen is to avoid that kind of attitude; embrace aimless activities and keep some space for things that are just pleasant, rather than having some external purpose. The investment banking industry is always going to give you opportunities to damage yourself; the secret is make sure you don’t get to a place where you feel you have to take them all.

Separately, Christmas might be a little sweeter at Morgan Stanley this year, as the investment banking division comes to the end of a year in which it has outperformed rivals, delivering 17% revenue growth for the first three quarters. As is often the case these days, the majority of that revenue growth is going to be taken by shareholders rather than employees. The bonus pool is expected, according to “a person familiar with the matter” to be up “low to mid single digits”. Although this doesn’t sound like such a great deal compared to the good old days, it should be substantially better than the Street average; Options Group are expecting overall flat pools, with Equities Sales & Trading up slightly and Fixed Income S&T down slightly.

The Bloomberg report notes that junior bankers at Stanley might expect a larger share of the pool this year. Morgan Stanley has already said that it will be increasing pay for associates by as much as 25% and promising them quicker promotions. Personal experience suggests that knowing what the overall pool has done is surprisingly little use in forecasting your own prospects, but this is a little bit of good news in an otherwise somewhat bleak year-end environment.

Meanwhile…

Tales of skinny-dipping involving partners and juniors at Goldman in the 1990s, among other titbits in this profile of Tim Leissner, the banker at the heart of the 1MDB scandal. The picture it gives is an all too familiar one of a “the mountains are high and the Emperor is far away” compliance culture of a profitable but geographically remote business unit, which revels in its lack of direct supervision from head office. Goldman did actually send the guys in grey suits round after the skinny-dipping party in 1998, but Leissner was still able to get a reputation for having affairs with executives and corporate clients (and the family members of Malaysian politicians), and was indulged because he was bringing in the deals. (Financial Times)

The US financial system goes into “season finale” mode over the rumours that President Trump is considering firing Jerome Powell from the Fed. Steve Mnuchin has had a phone call with all the bank CEOs to ask about liquidity, and published a press release which is not providing the reassurance it presumably intended (Bloomberg)

Bob Diamond did “Lunch with the FT” and explains the rationale behind his post-Barclays deals – they’re all in areas which are no longer profitable for banks because of the regulatory capital requirements. Also interestingly, he has basically no regrets with respect to BarCap and would happily buy the former Lehman investment banking operations if they ever came up for sale (FT)

A review of the best and worst forecasts made by the sell side for 2018, as a useful corrective now that everyone’s making their 2019 predictions (Financial News)

Once upon a time Stuart Bray handled tax-efficient transactions for Banker’s Trust. Then he sued Deutsche Bank for libel over a press release they sent out when they made a provision for some IRS litigation and settled for £20m. He used the money to set up a tiger breeding charity in South Africa … which a UK judge has now suggested he might have used to hide assets in a divorce. (Business Day)

Xavier Rolet, former LSE chief executive, is now going to be running CQS (Reuters)

Abdulaziz bin Hassan, the CEO of Credit Suisse Saudi Arabia, has resigned and will leave in the new year. Not clear why, as the bank is hiring in the region and building up rather than cutting (Bloomberg)

Although sales & trading revenues seem to be holding up, Q4 has been really disappointing for M&A volumes … (FT)

…although teams which have managed to get a hand in the series of consumer healthcare deals may have bucked this trend (Financial News)

Boring, underpowered and ugly. No, not your managing director; the Bloomberg review of the year’s worst luxury cars (FT)

Merry Christmas! This is our last newsletter until a brief return on December 31st and a full return in early January (3rd). Wishing all our readers a very pleasant and very rejuvenating break with family and friends!

“”

Christmas may not be a time to think about pay, but on the off-chance that you are, or that you’re reading this after the big day, we’d like to present you with the most detailed forecasts yet for the winners and losers in the coming bonus round.

The predictions below are based on assessments of the comparative performance of global business areas by bank in the first nine months of 2018 by Tricumen, a banking intelligence firm. Tricumen’s assessments are based upon its own research: banks don’t make this level of detail public.

To the extent that out-performance, equal performance and under-performance are aligned to getting paid (or not), we’ve used Tricumen’s figures as a proxy for what’s coming in the 2018 bonus round. Naturally, there may be disparities – at banks where entire divisions under-performed, one successful desk is likely to be dragged down by the rest. Equally, Tricumen’s appraisal of each bank’s performance is based only on the first nine months of the year, creating potential for ructions between October and December. Given that most banks have issued negative guidance for performance in the final quarter, it’s probably safe to assume that bonuses for 2018 will be assigned more parsimoniously than the predictions below might suggest, although their distribution by division should still apply.

Bank of America Merrill Lynch bonus predictions 2018

Sweet spots: None at all. Tricumen says BAML didn’t out-perform the market in any areas in the first nine months of 2018.

Neutral spots: Securitization, equity capital markets (ECM), rates, equity derivatives, prime services. – This is where Tricumen says BofA performed in line with the market in the first nine months of 2018.

Sour spots: Debt capital markets bonds, debt capital markets loans, FX, credit, commodities, cash equities. Tricumen says BAML under-performed in all these areas in the first three quarters.

Barclays bonus predictions 2018

Sweet spots: FX, rates, equity derivatives, prime services.

Neutral spots: DCM bonds, DCM loans, securitization, M&A, credit, cash equities.

Sour spots: None.

BNP Paribas bonus predictions 2018

Sweet spots: DCM bonds, DCM loans, securitization, equity derivatives.

Neutral spots: M&A, prop trading.

Sour spots: ECM, FX, rates, credit, commodities, cash equities, prime services.

Citi bonus predictions 2018

Sweet spots: FX, cash equities, equity derivatives.

Neutral spots: Prime services.

Sour spots: DCM bonds, DCM loans, securitisation, equity capital markets, M&A, rates, credit, commodities.

Credit Suisse bonus predictions 2018

Sweet spots: Equity capital markets, M&A.

Neutral spots: Rates, credit.

Sour spots: DCM bonds, DCM loans, securitisation, cash equities, equity derivatives [although this is questionable given the bank’s claim to have increased revenues in equity derivatives by 70% year on year in the third quarter], prime services.

Deutsche Bank bonus predictions 2018

Sweet spots: M&A.

Neutral spots: DCM bonds, DCM loans, credit.

Sour spots: Securitization, ECM, FX, rates, cash equities, equity derivatives, prime services.

Goldman Sachs bonus predictions 2018

Sweet spots: ECM, FX, rates, credit, commodities, cash equities.

Neutral spots: Equity derivatives.

Sour spots: DCM bonds, DCM loans, securitisation, M&A, prime services.

HSBC bonus predictions 2018

Sweet spots: DCM loans.

Neutral spots: FX, prime services.

Sour spots: DCM bonds, securitisation, ECM, M&A, rates, credit, commodities, cash equities, equity derivatives.

J.P. Morgan bonus predictions 2018

Sweet spots: Commodities, cash equities.

Neutral spots: ECM, M&A, FX, rates, credit

Sour spots: DCM bonds, DCM loans, securitisation, equity derivatives

Morgan Stanley bonus predictions 2018

Sweet spots: DCM loans, ECM, prime services.

Neutral spots: M&A, FX, commodities, cash equities.

Sour spots: DCM bonds, rates, credit, equity derivatives.

RBC bonus predictions 2018

Sweet spots: DCM bonds, securitisation, rates, credit, commodities.

Neutral spots: DCM loans

Sour spots: ECM, M&A, cash equities, FX, equity derivatives, prime services.

RBS bonus predictions 2018

Sweet spots: DCM bonds, securitisation.

Neutral spots: –

Sour spots: DCM loans, FX, rates, credit

SocGen bonus predictions 2018

Sweet spots: ECM, M&A

Neutral spots: DCM bonds, securitisation, rates

Sour spots: FX, credit, commodities, cash equities, equity derivatives, prime services.

Standard Chartered bonus predictions 2018

Sweet spots: DCM bonds, DCM loans, rates.

Neutral spots: Commodities.

Sour spots: Securisation, M&A, FX, credit, prime services.

UBS bonus predictions 2018

Sweet spots: Securitisation, M&A, FX, prime services.

Neutral spots: Commodities, cash equities, equity derivatives.

Sour spots: DCM bonds, DCM loans, advisory.

Wells Fargo bonus predictions 2018

Sweet spots: Credit, cash equities, equity derivatives, prime services.

Neutral spots: DCM bonds, DCM loans, securitisation, FX, commodities.

Sour spots: ECM, M&A, rates.

Top performing business areas overall:

Lastly, as the chart below (also based upon Tricumen research) shows, the highest operating revenue per head in the first nine months of 2018 was generated in ECM. ECM also experienced one of the biggest increases in operating revenue per head in the first nine months of this year. If you work for an ECM division which also outperformed (Credit Suisse, Goldman Sachs, Morgan Stanley, SocGen) and you don’t get paid, you could therefore start 2019 in a state of disgruntlement.

““

Last year, I was at a friend’s birthday party, who, like me, worked in investment banking. Unsurprisingly, most people at the party was working in the same space; many well-off, promising faces from investment banks and funds. Another friend was speaking to me about leaving her job without a continuation plan, to which I asked if she had any emergency savings. To my surprise, not only was she not familiar with the rainy-day saving concept, but she also had less than £500 saved after several years. “That’s barely a month, not even two weeks of expense”, said I. To illustrate to her how imprudent it was, I asked around the party of how much savings people had. Even more astonishing, not a single person in this crowd had more than £1,000 in savings; while most had less than £500.

Assuming a typical first-year investment banking analyst salary of £55k ($70k) and a 50% bonus of £27.5k, how do people who make 2.4 times the average London salary (£34.5k) end up without any savings?

To understand the cause of this, I conducted a survey on the spending behaviour of my peers. £55k base at a 33% effective tax rate (with National Insurance/other contributions) results in take-home pay of c.£3k/month. The following essential expenses already account for around £2.1k/month.

• Food: weekday meals or groceries – £100/week or £433/month
• Rent – £200/week or £860/month
• Essential bills (electricity, water, gas) – £25/week or £108/month
• Phone bills – £10/week or £43/month
• Transport cost (public transport and some taxi rides) – £50/week or £215/month
• Other miscellaneous expenses such as clothing, household amenities, gadget/travel insurance, gym membership, other online subscriptions (e.g.Spotify/Netflix) and more – £100/week or £433/month.

If you often eat out and/or going out 2-3 times every weekend with an average spend of £50 per occasion, this amounts easily to £645/month. After deducting student loan repayment of another c.£300/month, we’ve exhausted £3k. This is how many have been living on their pay checks month-on-month without any savings.

In addition, setting imprudent personal finance management asides, most junior bankers often scale-up their standards of living based on what they think they’ll be able to achieve with their salaries. They don’t actually realize that their salaries will run out faster than they think.

It’s because their salaries run out that many also spend their bonuses. The £27.5k bonus, equivalent to c.£18.k take-home pay, is often spent unwisely because people think they deserve some relaxation after such an intense work-hard/play-hard schedule.

Hence there are:

• Two annual long vacations (all-inclusive of hotels, flights, meals and experiences, at £2.5k each) costing £5k.
• Three short weekend vacations (all-inclusive at £1k each) costing £3k.
• Expensive hobbies (skiing, skydiving, golf, scuba diving, sailing courses, sport car rentals, fencing, equestrian, art club, or wines) easily costing an average £100/week or £5.2k a year.
• Branded clothing/accessories such as expensive suits, handbags, shoes or a combination costing £250/month or £3k a year.
• Costly spontaneous, impulse spending such as last-minute concerts or spontaneous spending on nights out, costing £1k a year.
• Spending on an electronic device upgrade or new much-hyped gear such as a phone, laptop, tablet, drone, camera or hoverboard. £1k a year.

As such, we are left with less than £500 from the £18k.

It’s easy to spend money. It’s also a mistake. Prioritising a rainy-day fund or starting to save for retirement is a habit you need to get into early in your career. – Especially in banking, where you might leave your job without an exit plan.

If you’re a junior banker you therefore need to remind yourself that you’re not that rich after all. Your money will disappear faster than you think.

Below is the flow chart I used to manage my money while I was at Goldman Sachs. I strongly recommend that anyone in banking follow the same approach!

Mai Le

Mai Le was an investment banking associate at Goldman Sachs before she left to found her own venture Vietnam Inbound (vietnaminbound.com). Besides writing on her own blog (lequynhmai.com), she also runs a cover-letter sharing community called Cover Letter Library (coverletterlibrary.com).

““

It’s December, the time of year when even the stoutest constitutions and youngest revellers are likely to spend a morning or two wondering about the long term health consequences of the banker lifestyle. And looking at the available research, the news is not great.

There are several ways in which a career in investment banking can seriously damage your health.

Banking will give you opportunities to damage yourself

The combination of youth, significant disposable income, stress and a feeling that you’ve earned a bit of fun go together to fuel unhealthy lifestyle habits in bankers just as they do in pop stars. The stereotypical drug of finance is of course cocaine, but lifestyle coaches and wellness professionals working with the industry also see plenty of misuse of prescription drugs (particularly sleeping pills and anxiety medication). And in many ways, according to longevity specialist Tim Bean, legal drugs like alcohol and caffeine can be more damaging, simply because their overuse is more ubiquitous and easier to sustain over a the long term.

Alexandra Michel, a former Goldman Sachs banker who is now a business school professor at Wharton, documented an entire “banking body-abuse cycle” when she surveyed twenty-four entry level investment bankers, following them as their careers developed. Every single one of them developed a stress-related physical or emotional disorder at some point. It starts in your first year, with “abuse”, sleep deprivation and working through illness. By the fourth year, bankers tend to move into “breakdown” when the body starts fighting back. They develop tics and bad habits like nose-picking or nail-biting, and start to shop and over-consume to manage their stress. If you make it through this stage, a “care and attention” phase seems to begin after six years into the career, although this is often delayed in bankers who move jobs a lot; it seems like you need to be socialized into ways of looking after yourself.

Banking will give other people opportunities to overwork you.

One of the biggest surveys ever done on the effects of workplace stress (the “Whitehall Study” carried out for the British civil service) collected data from 10,000 employees and concluded that yes, stress kills. Employees, particularly those low down in the hierarchy, who reported feelings of being under pressure to perform, and who did not feel in control of their workload, had measurably worse health outcomes; it’s almost as bad for you as smoking. Even this year, there have been so many cases of cardiac symptoms in junior bankers in their 20s and 30s that doctors have been speaking out about the phenomenon. Jeffrey Pfeffer’s book on white collar stress, “Dying for a Paycheck”, highlights tragic cases like that of Moritz Erhardt, the Merrill Lynch intern who died after an epileptic fit at the end of a 72-hour marathon stint. Erhardt’s death prompted several banks to bring in new rules on the treatment of junior staff, but today’s juniors say they’re not always observed. Pfeffer claims that “the person you report to at work is as important to your health as your family doctor”.

You are likely to develop habits that will damage your health in the long term

Banks tend to attract and recruit “insecure overachievers”. These are people who, for whatever deep seated psychological reason, are easily motivated by fear of slipping behind, and who therefore don’t need to be forced to work long hours; they will do it all on their own. Professor Laura Empsom of Cass Business School looked at many cases of senior employees who had long since established and cemented self-destructive behaviour patterns, and who were unable to switch off the intensity even after reaching the top of the tree. There has always been a culture of putting the client first in the investment banking industry, but in some people this stops being a metaphor for working diligently, and starts turning into a compulsion that leads people to put their clients’ financial needs ahead of their own lives.

It’s probably this sort of personality-type that finds it so difficult to make use of the help that’s available; they’re afraid that any sign of weakness will put them at a disadvantage in the competitive hierarchy, and they have a weak sense of self that needs their status in the hierachy to hold it up. It’s a personality type that’s often found at elite universities and even has a name – the author William Deresciewicz calls elite students “excellent sheep”. He says that family pressure while growing up can build individuals who are only capable of valuing themselves in terms of institutional measures of success; social praise becomes a kind of addiction that can lead to behaviour almost as destructive as more hedonistic methods of pulling your life apart.

So, should you get out, to save your health? Well, not necessarily. Investment banking isn’t the only stressful job in the world, and often, people who leave the industry to pursue fulfillment find that they’ve carried their unhealthy habits with them. Alexandra Michel found this to be the case when she caught up with her case studies later on in their careers. The guy who said to her that “I have made a comfortable life for myself here. There is hardly a day when I have to be in the office later than 11pm,” looks like he hasn’t shaken off the warped perception of normality.

Taking control is the first step

What you really need to do is to take control of your career. Not only is a sense of lack of control one of the most crucial stress factors that surveys have found to drive health-destroying stress, but if you’re in control, then you can be the one to make decisions about sleep and travel, bearing your own health in mind. But how do you get to that position? And once you’ve reached it, how do you get your clients to buy in, and how do you stop worrying that your competition will eat your leisurely lunch? How many of us are so lucky? Not one in ten thousand.

Realistically, working in a bank is not a healthy career. You’re unlikely to get black lung or industrial deafness, but it’s rare to spend a long time in banking without at least some long term consequences. Perhaps the best thing to do is accept that and concentrate on the things you can control, like diet and exercise. And for heaven’s sake, keep the recreational substances to a manageable level.

Merry Christmas!

““

People who don’t work in finance think bankers are all inordinately rich. This isn’t necessarily the case – especially at the start.

When I started out in banking in 1999 I was on a $40k salary. I’m not quite sure how I survived on that in NY City, but I did. I certainly wasn’t living the “banking life.” I was subsisting: staying late and having dinner at work on weekdays to save money. Sometimes I’d have dinner at work on weekends too – for the same reason.

I know people live on less, but it’s not easy. After tax, $40k doesn’t go far in NYC. My entire paycheck was spent almost before it hit my bank account.

Fortunately, though, there was also a bonus. Back then, I used my bonuses to pay down my college loans. My salary was for living (frugally); my bonuses were for reducing my debts. Within a few years, those bonuses meant I paid my college debts off in full.

As time went on, my salary rose. From $40k, it went to $100k and then to $150k. Given my past frugal habits, you might’ve thought I’d be able to save money from this higher salary, but I didn’t. I started spending more. In fact, I started spending my whole salary and even using a proportion of my bonus to cover my monthly expenses.

Sadly, this is a pretty common theme in finance. When you work in banking, your salary and your bonus often go up linearly, but your expenses and your cost of living go up exponentially (especially when you have children).

It’s called the burn rate – the rate at which you burn through your money. When I was in banking, my burn rate was $175k+. That’s low: even when I was spending “big” I was still pretty frugal. I have friends whose burn rates are $350k+: they need to earn $650k just to stay flat. Very few banks will pay you a $650k salary, so once you hit that level you’re almost certainly using your bonus too.

How does this happen? Tom Wolfe gives a steer in Bonfire of the Vanities. His banker protagonist, Sherman McCoy recalls where he spent last year’s paycheck, and it goes like this:

“I’m already going broke on a million dollars a year! The appalling figures came popping up into his brain. Last year his income had been $980,000. But he had to pay out $21,000 a month for the $1.8 million loan he had taken out to buy the apartment. What was $21,000 a month to someone making a million a year? That was the way he had thought of it at the time-and in fact, it was merely a crushing, grinding burden-that was all! It came to $252,000 a year, none of it deductible, because it was a personal loan, not a mortgage. (The cooperative boards in Good Park Avenue Buildings like his didn’t allow you to take out a mortgage on your apartment.) So, considering the taxes, it required $420,000 in income to pay the $252,000. Of the $560,000 remaining of his income last year, $44,400 was required for the apartment’s monthly maintenance fees; $116,000 for the house on Old Drover’s Mooring Lane in Southampton ($84,000 for mortgage payment and interest, $18,000 for heat, utilities, insurance and repairs, $6,000 for lawn and hedge cutting, $8,000 for taxes.[…more expenses I don’t feel like typing out…] The tab for furniture and clothes had come to about $65,000; and there was little hope of reducing that, since Judy was, after all, a decorator and had to keep things up to par. The servants…came to $62,000 a year…the abysmal truth was that he had spent more than $980,000 last year. Well, obviously he could cut down here and there-but not nearly enough-if the worst happened!

Sherman was on the hedonic treadmill. I’ve written about it here before: it’s very easy to get on and very difficult to get off. When you’re on it, you find yourself not just wanting but needing certain things. Things you think you can’t do without. A better house, a better car, summer in the Hamptons or the south of France, nights out, new clothes, a second home.

I see it all the time. It’s not your fault: it’s the human condition. Humans quickly adapt to circumstances and then want more. We look around and see our friends doing something and it becomes normal.

What you need to remember though, is that just because you can afford to buy something this doesn’t mean you should. Banking is not a stable career choice: people often get downsized and you could easily find yourself with expenses you can’t sustain and debts you can’t pay off.

For some, the awakening happens too late. When they are in their forties, with little saved up.

I spoke to a friend who’s 58 recently, he had lost a lot when Lehman went down, and then had to pay for his kids’ weddings. There he was, theoretically just a few years from retirement but needing a job that pays $500k because he had no savings.

Stop spending your bonus. Start saving your salary. Get off the treadmill, before you get thrown off.

The author is a former Goldman Sachs managing director and blogger at the site What I Learned on Wall Street (WilowWallStreet.com). What I Learnt on Wall Street is an education focused business founded a group of Wall Street veterans from the best firms determined to help the next generation.

““

Everyone knows it’s no bed of roses to date a banker. Nor is it the easiest thing in the world to be a banker looking for love. But one way or another, it does seem to happen; singleton analysts who’ve been complaining about their slave-driver bosses grow up into married vice presidents VPs complaining about their lazy entitled juniors. And it’s when you’re a married VP that the hard work really begins.

In a sense, bankers have a matrimonial head start. Because so many relationships founder in the first year or two of the analyst programs, it’s unusual for there to be a mismatch of expectations in long term banking relationships. – Most people who have married someone in banking met their spouse while he or she was already working and know what to expect. Missed dates, weekend conference calls and constant tiredness are deal-breakers for some people and that’s understandable, but if you really feel that way, why did you marry a banker? The time to complain about that sort of thing was before you put a ring on it.

Although spouses of bankers are aware that the counterpart to the big money is a lack of time, that doesn’t mean that they have to like it. Time spent apart is time in which two people can grow apart, if you’re not careful. When you work in finance, the worst thing you can do, however ridiculous your schedule, is to get into the habit of walking back into the marital home and heading straight to sleep. If your spouse was a client, after all, you’d make the effort to go the extra mile, put on a smile and ask about their day and interests. And conversely, if you constantly greeted a CFO with monosyllables and bad temper, you would expect the advisory and capital markets business to drop away before too long.

“Elly”, an anonymous banking spouse sets out the things you have to put up with to stay married to a banker. It pretty much involves total subjugation to the job: “My husband works ungodly hours. He takes client calls on Friday nights, has conference calls on Sunday mornings and evenings, in the middle of family dinners, and dinner dates,” she says.

Being a banking spouse is genuinely hard work. But people stay married to doctors, who also work long hours under pressure. Truck drivers have families, and they spend longer away from home than all but the most obsessive M&A bankers. There are even married people in the armed forces, who hold their family lives together under much more extreme stresses, and with the added possibility of being killed.

What’s the difference? It’s not so much the actual conditions as the fact that nobody is going to begrudge their doctor spouse staying late at work to treat a patient, or their military spouse going on a “business trip” to Afghanistan. The thing that really determines whether a banking couple is going to make things work is whether, at base, both partners believe in what they’re doing. If you object to the business itself, you’re going to object when it starts interfering with your family life. If your partner shares your ambitions and values, they’re more likely to understand the sacrifices that need to be made.

The banking relationships which work, therefore, are those in which the non-banking spouse accepts the need to make sacrifices for the ‘greater good.’

Again, Elly explains what it takes: “He has a job that requires him to be there for his client,” she says. ” – Much as I dislike it, said client has a lot of money and this money trickles down to my husband and it helps the pay the taxes and bills. Don’t get me wrong, I hate client calls to death. But they mean well for my other half’s career and could help make him MD… so I let it slide. The dinner could go cold for all I care. He could miss my birthday if something goes wrong at work. I will be sad though, but as long as he has his job and it makes him happy, I am happy…”

If this sounds like masochism, maybe it is – although it’s masochism mitigated by money that ‘trickles down.’

It’s once the first kids arrive, however, that banking relationships (like many others) experience real strain. Here, you will gain a new appreciation for how considerate your MD actually was with his demands, and how respectful of your sleep patterns. At this point, the best advice is probably to spend some of that money on on babysitting; it’s one of the few luxuries you can buy where you’re sure you’re using all that you’re paying for.

Banks typically try not to say that they are well-capitalised and have no need of state aid, because it tends to invite speculation as to why the reassurance might have been necessary. But when you’re the chairman of Deutsche Bank, giving a year end interview to Frankfurter Allgemeine, the question is bound to be asked and it’s impossible to duck. Paul Achleitner states the case as strongly as possible “Deutsche has a very strong capital base, even compared to its competitors”, and with respect to state aid “this scenario will not come about.” However, after the year Deutsche has had, and with the share price down from just under €16 at the start of the year to €6.97 at yesterday’s close, it’s not hard to see why Mr Achleitner is on more comfortable ground giving his views on macroeconomics and Donald Trump.

This was meant to be the year that Deutsche put its legal troubles behind it, and to an extent that’s what’s happened – the Deutsche Bank Violation Tracker only records four US penalties this year, totalling less than $200m. The bank even managed to settle one set of investigations into the German “Cum-Ex” scandal for a token $4m and gained immunity in an EU antitrust investigation. However, with police raiding the headquarters building over issues arising from the Panama Papers, the whole cycle looks like it might begin again. And this year, in any case, Deutsche’s problems have been more managerial than legal.

It started back in April, when CEO John Cryan was dismissed, in confusing circumstances which led some investors to criticise the chairman. A month later, it was revealed that the bank was considered a “problem” institution by one of its main US regulators and a “troubled” one by another. The regulators were finally losing patience with the key issue that’s been the Achilles Heel of Deutsche ever since the financial crisis; its rapid growth and complicated derivatives operations have left it with a set of creaking, incompatible reporting systems that aren’t up to the task of providing information that either regulators or management can be comfortable with. Sorting out the mess is a task that’s defeated several top teams, and until this is done, it’s incredibly difficult for Deutsche to compete.

The man who was placed into this unenviable role was Christian Sewing, who promptly sent out a perfect set of mixed messages, reiterating Deutsche’s commitment to investment banking (and to the USA, and to Asia), while nevertheless demanding big job cuts and shaking up top management, but only promising 3% overall cost reductions to shareholders. This caused predictable damage to Deutsche’s franchise and reputation, which ended up needing to be built back in some key areas. Toward the end of the year, we started noticing that Deutsche was hiring in a number of areas, and paying the usual “danger money” to do so.

Will things turn round next year? If so, it won’t be cheap. Deutsche is correct to say its capital position is sound, but capital isn’t the problem; the franchise is, and the franchise is increasingly made up of scared, unhappy and relatively junior people. The telling moment will be the 2018 bonus payments, which have the potential to cause trouble. With less compliance overhead, undemanding cost cutting targets and significantly lower headcount, these should be an opportunity for Deutsche to reward loyalty and demonstrate its continuing seriousness. If Deutsche wants people to stop asking unpleasant questions, it needs to put its money where its mouth is. Whether it will remains to be seen.

Separately, by and large, US banks had a better 2018. But next year brings some knotty personnel problems for many of them, particularly relating to London staff working for business lines that are scheduled to move to Paris, Dublin, Amsterdam or Frankfurt after Brexit. Some senior staff, mindful of both their settled family lives and the comparative lack of amenities in those cities (well, other than Paris), have had it in mind to live an international commuter lifestyle, flying back between London and Europe.

The message coming from the employers is “not on our dime”. JP Morgan and Morgan Stanley are offering six months worth of “smoothing” tax differences, help with travel and support for families who don’t want to move during the school year, and that’s it. Citi is being even tougher according to the FT; just the standard relocation package to help you with the removals. Goldman’s plans are “in flux”, but staff are being encouraged to understand that “they’re gone for good” and that they shouldn’t expect a commuter package. Brexit means brexit, after all.

Meanwhile …

When some people say “Artificial Intelligence is overhyped and will never replace human traders” it sounds a bit like sour grapes. When David Harding (the “H” in AHL, founder of Winton Capital and one of the most successful quant investors ever) says it, the view commands a bit more respect. (Financial News)

Crispin Odey, on the other hand, has always relied on his own views. In their recent accounts, his firm saw its profits halve, mainly due to the legacy of 2017. Having had a market-leading year in 2018, however, he ought to do better next year (Financial News)

And the hiring boom for quants and data scientists shows no signs of abating; a poor performance year for quant funds in 2018 is just being seen as an opportunity for big diversified houses to staff up at the expense of specialist firms who had a lean year. (Business Insider)

How do you steal a hundred tons of cobalt from one of Holland’s most secure warehouses? It takes a bit of planning (Bloomberg)

The British Foreign Office runs a helpline for citizens overseas. Not everyone calling it seems to have a clear idea of what constitutes an “emergency” (one caller thought that the New Delhi embassy had vegetarian sausages for sale) (Bloomberg)

Sad montage time – these were the hedge funds we said goodbye to in 2018 … (Bloomberg)

… and these Swiss banks disappeared from the sector too (Finews)

““

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