Morning Coffee: Michael Klein, the polite, hard-working head of CS First Boston. Pay transparency on Wall Street
What is it about Michael Klein, the man who will rule the soon-to-be spun-out boutique CS First Boston?
Seemingly, Klein's success is simply the product of an immense work ethic and a propensity for politeness, plus all the niceties that go with that.
The Wall Street Journal cites several of Klein's friends who think he's great. “He’s probably the hardest-working person I know on Wall Street,” declares Howard Ungerleider, president and finance chief of Dow, who worked with Klein on a deal. “Where others see uncertainty and dislocation, Michael sees clarity and opportunity,” affirms Raymond McGuire, who worked with Klein at Citi, making it sound like Klein should be negotiating an end to the Ukraine-Russia war rather than running a large banking boutique. Klein is faultlessly polite, say other of his former colleagues: he often sends personal thank you notes.
Klein's achievements include helping Bob Diamond buy Lehman, helping Dow Chemical buy Dupont, and nearly becoming CEO of Citi. Credit Suisse board members saw him as the 'obvious candidate to run the business' gushes the WSJ. In this, he displaced David Miller, who'd been heading investment banking and capital markets at CS since 2019 and who also looked like a reasonably obvious candidate to run the new operation.
Alongside his many achievements, one of Klein's other big advantages over Miller could possibly be his connections with Saudi Arabia. He's been an advisor to the Saudi Public Investment Fund (PIF) and worked on the Saudi Aramco IPO in 2019, when he's said to have been instrumental in urging the Saudi elite to take a "forward-looking approach" after Aramco's production facilities were attacked in September 2019. Alongside his boutique, M Klein & Company, Klein has spent the past few years involved in SPACs with their own links to the PIF. Klein's SPAC, Churchill Capital Corp IV, bought PIF-backed Lucid Motors in 2021.
Saudi Arabia is playing a pivotal role in Credit Suisse's restructuring. The Public Investment Fund owns 37% of the Saudi National Bank, which last week invested $1.5bn investment in Credit Suisse to buy a 9.9% stake and become one of the bank's biggest shareholders. Credit Suisse declined to comment for this article, but it's understood that Klein did not negotiate this deal. However, Credit Suisse CEO Ulrich Körner said last week that CS First Boston wants to expand in Saudi Arabia, even while jettisoning many of its equity and debt capital markets bankers in Europe. Klein could probably help with that expansion. In turn, the Saudi National Bank chairman said yesterday that he "likes" Credit Suisse's new leadership, even though the SNB is not ready "to go out and buy a European bank or something like that."
As a great dealmaker, it's probably not surprising that Klein seems to be doing rather well out of the formation of CS First Boston himself. The FT reported last week that Klein's boutique, M Klein & Company, will be merged with the new bank and that as well as running the business, Klein will receive a "substantial stake" as a result. In 2020, the FT reported that M Klein & Company employed 20 people. One of Klein's SPACs was involved in a legal case earlier this year, but this seemingly won't impact the newly formed CS First Boston: Klein's SPACs aren't part of the deal.
Whichever way you look at it, Michael Klein is about to become a far more powerful person on Wall Street. An Andrea-Orcel-ish approach to hard work probably helped. So too did the thank-you notes. But what really differentiates an excellent banker is an ability to bring clients over the line.
Separately, tomorrow is the day that pay transparency reaches Wall Street. The New York Times reports that from Tuesday every company in New York will be obliged to put salary ranges alongside its jobs and must provide them in "good faith." Companies that don't can be fined $250k for repeat offences.
Accordingly, banks like Citi are posting salaries already. A senior associate at Citi in NYC can earn $125k annually (which sounds low given that second year analysts are earning nearly the same amount). The transparency rule doesn't apply to bonuses, which means that while banking pay is more transparent, total compensation remains opaque.
SNB has been pursuing plans to acquire stakes in European and American financial institutions for some time. In addition to Credit Suisse, Julius Baer, Standard Chartered and the Asian DBS Group have also been mentioned as possible targets. (FiNews)
Credit Suisse has invited 20 banks to join the syndicate for a rights issue as it seeks to build on the SNB's commitment and raise CHF4bn. (Bloomberg)
Credit Suisse had planned to call the new unit 'First Boston', but it no long has the naming rights to that so it had to go with CS First Boston as it was cheaper. (Financial Times)
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