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Morning Coffee – Banker expenses are being cut and posh restaurants are out of bounds. Top JPM banker’s sweary tirade

There’s definitely a point in the banking earnings cycle which can be identified by the memos that go out about restaurant bills.  When the revenues are doing well, nobody cares too much about expenses claims (and everyone’s usually too busy to really rack them up).  At the bottom of the cycle, managers are just happy to see some evidence that a client has picked up the phone.  But in between the two extremes, there’s usually a period around the point of inflection, when denial is still strong and it’s possible to believe that a multi-million dollar cost base might be materially affected by a few hundred-dollar steaks.

It seems that this is where we are; according to rumours on which the company has decided not to comment, bankers at Macquarie in Sydney have been told that they aren’t allowed to have lunch at Mimi’s any more.  This is very unlikely to be the only such policy in the industry – it’s more normal for these things to work by raised eyebrows and shared understandings than formal policies, but all over the world, there will be an implicit list of places that nobody wants to see a receipt from for a while.

Is this a false economy? Yes and no.  On one hand, client entertainment really doesn’t move the dial as far as expenses are concerned, and cutting the marketing budget is always a questionable way to react to a more difficult revenue environment.  Macquarie’s competitors are saying things like “I love these moments in the cycle because the big investment banks make all these dumb decisions based off headquarters”.

It's not so much that anyone is actually going to exchange an advisory or capital markets mandate for a $149 “caviar pie” – that would be illegal as well as dumb.  But banking is a game of self-confidence as well as one of client relationships.  To a large extent, the people eating $298 rib-eyes and drinking $50 margeritas are paying for their self-image as high rollers, as much as the no doubt delicious food and excellent service.  Demoralised bankers don’t tend to get the deal.

But on the other hand, symbolic gestures like this are a good way to get people to take the business cycle seriously.  The message is never “no more Mimi’s forever”; it’s “no more Mimi’s until we get back on budget”, and that’s an incentive in itself.  A lot of the objection at Macquarie seems to be not so much to the price of the entrees as the fact that the restaurant is eight kilometres outside the business district, meaning that a lunch meeting there can take up half the working day. 

There are some restaurants that you take clients to because you want a deal, and some restaurants that you go to celebrate a deal, and it’s often worth reminding bankers which is which.  And after all, the greatest flex is never to be the banker who signs the biggest check at the fanciest place in town – it’s to be someone who CEOs and investors will happily meet for a sandwich in the park.  If you can get them to come there, the most prestigious place to discuss a multi-million dollar transaction is the kitchen of your own home.

Elsewhere, the saying always goes that “the graveyards are full of irreplaceable people”, but some bankers are missed more than others.  And one day, whether he goes into politics, heads for the beach or decides to write a boring autobiography, JP Morgan will have a massive Jamie Dimon-shaped hole to fill.  Of the three identified internal candidates for the succession, Jennifer Piepszak and Marianne Lake haven’t got much investment banking experience, and according to some internal rumours, Dan Pinto doesn’t necessarily want the job.

Which means that for the time being, Dimon can do what he wants – whether it’s turning the air blue with a frank assessment of former President Trump at a reception, or spending eye-watering sums on digital transformation projects. 

Some shareholders are apparently complaining about the expense line and about Dimon’s general style, but nobody has an alternative long term plan and in many ways, it’s a quite selfless gesture spending money that could otherwise burnish his personal reputation on projects which will largely benefit his successor.  As a senior regulator said of JD “he talks trash, but he can back it up”.

Meanwhile …

Some things are more important than money, even to Stevie Cohen.  He has apparently said that he bought the New York Mets “to win, not to make money”, and has spent lavishly to achieve it.  He also seems to be mellowing personally, a surprise to former employees who might have expected him to berate players who dropped a catch (Business Insider)

“The principal base is now the office, but people are travelling again and meeting clients. The chances of getting through a day without at least one physical client meeting in your diary is very small”, according to Charlie Jacobs of JPM.  Although there is still some home-working (particularly at Citi), bankers are increasingly coming into the office just to make sure they’re not on any forthcoming redundancy lists. (Financial News)

Unusually, an activist ESG investor concentrating on the S rather than the E; SCO Investments is starting a public war of words with JP Morgan over its last racial and diversity audit. (Bloomberg)

Joe Stadler will be retiring from UBS at the end of 2023.  This was expected by many, after his move to an executive vice-chair role in the Global Wealth Management division, and George Athanasopoulos’ promotion to run the family office business that Stadler had developed. (Finews)

Two British techbro entrepreneurs raised $200m of venture capital funding for a business that bundled music festival tickets with stays at luxury hotels and concerts with rap stars, then … you can pretty much guess the rest of the story.  It’s never great when your PR has to make comments like “only employees of legal age were served alcohol”. (New York Post)

For the first time in a very, very long time, European banks have been having a better time of things than their Wall Street counterparts. (Bloomberg)

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