Morning Coffee: Junior bankers’ lives get even worse. The Michael Crichton of deal memos
As we have noted before on occasion, a useful basis for forecasting trends in the investment banking industry is to ask what would be maximally unpleasant for employees, and then assume that’s what will happen. You wouldn’t necessarily have been able to predict a global pandemic in this manner, but given the information that one had happened, the “what would suck most” principle would give you a pretty clear idea of how the lockdown might affect working practices for junior investment bankers.
On the positive side, reports Financial News, there’s no longer any problem with running out of clean laundry because you’ve been stuck in the office so long. That’s about it for the positive side. On the negative side, now that the working day is no longer punctuated by the commute to and from the office, there’s less to make senior bankers realise what kind of demands they’re making on their teams’ time. Giving a task that will take until 2am to complete might cause a shudder of compassion when you have to hand it over in person and realise that you’re keeping the associates in the office, but when they’re at home anyway and you’re dealing with them by email and Zoom, it apparently gets a lot easier.
Unlike the MDs, junior bankers don’t have weekend places to retreat to or chickens to feed; often they’re stuck in small shared apartments with flatmates that they can hardly talk to because they’re working for different banks. And although, in principle, the working hours reforms and protected weekend policies are still in place, the nature of lockdown has tended to blur all distinctions; one junior banker comments that “Weekends are still free, it just means we all have to squeeze everything in before Friday”.
Part of the problem here is that although revenues have generally been awful for IBD teams so far this year, investment banking work often expands, rather than contracts, when deals are thin on the ground. In the absence of transactions to work on, bankers want to do pitches, and pitches require pitchbooks, which in turn require endless painstaking work by the juniors. Any inefficiencies in communication are likely to add further rounds of revisions to the already Sisyphean task of polishing PowerPoints to perfection, and tempers are unlikely to have been improved by everyone’s desperation not to be left out of the few deals that are going ahead.
Added to which, it’s always been recognised in the banking world that part of the purpose of the hard life of junior bankers is that it’s an apprenticeship – you’re meant to be making contacts, picking up the unwritten rules and learning by watching the masters. That’s probably not happening anything like as much, as juniors are less able to sit at the back of the room, carry bags or have casual conversations. At least their shirts are slightly cleaner.
Elsewhere, Christopher Reich a name that might be familiar if your memory stretches back to having spent a lot of time in airport bookshops, has a new thriller out featuring his spy hero Simon Riske in a caper which is loosely based on the 1MDB scandal. This follows on from “Numbered Account”, a thriller set in a Swiss bank. As you’d expect, Reich comes from the world of investment banking, having spent his early career in M&A at UBS, where he was given the job of writing prospectuses because he was no good with numbers, and where board member Nikolaus Senn once called him “our Michael Crichton”.
We haven’t, so far, been able to find any of the prospectuses which earned this compliment, but the idea of having a financial document with Crichton-style plot twists and cautionary social themes seems pretty attractive. Perhaps the Dan Brown of finance is still out there, drafting IPO documents with complicated conspiracy theories and occult symbology. Or maybe high yield debt underwriters take their inspiration from Jack Reacher, always moving on down the road and never looking back. More or less every lawyer in the world seems to think they’re a potential John Grisham, so it’s good to see Christopher Reich representing the finance community, and we hope that his hero’s next outing is called “Riske Management”.
Overworked junior bankers can recreationally infuriate themselves with “tips” from CEOs and the like about how to set boundaries while working from home so you’re not bothered all the time. (Bloomberg)
An in-depth interview with world welterweight champion and investment banker Jessica McCaskill, who apparently takes her laptop to the gym so she can work remotely between bouts. (Guardian)
Did bankers ever really love the BlackBerry so much more than the iPhone? Or was it just that employers provided them when they were the only option for mobile email, and then it took ages for IT systems to adjust when smartphones came out? In any case, the company is bringing out new handsets, so people who still haven’t got used to the absence of a physical keyboard can have an option. (Finews)
And people wonder why there aren’t more sell recommendations – Kepler Cheuvreux has had to remove one of its analysts from coverage of two retail stocks because she has received “anonymous intimidation attempts”. (FT)
An overview of the near-term future of European investment banking, as large and small firms begin to realise that they have to come to terms with structural profitability issues. (WSJ)
On the other hand, bulls of the industry are pointing out that improving profitability isn’t just a matter of firing investment bankers, as the first half of 2020 has demonstrated. (Sunday Times)
One side-effect of banks having moved to video interviews as a result of the pandemic is that they are able to spread the net a bit wider, recruiting outside their typical universe of a few elite schools and improving their diversity. (Bloomberg)
Little technical changes like this often herald big future restructurings which affect people – UBS’ “Project Rigi” is transferring large amounts of deposits between legal entities. (Financial Planner)