Morning Coffee: Morgan Stanley thinks JPMorgan is a fine place to work now. 30-something bankers need their bonuses to live on
Tomorrow is Goldman Sachs' investor day and in a timely reminder of its consumer banking problems, the firm disclosed an expanded probe into its credit card business on Friday. Goldman has already said it's pulling back from consumer banking in an attempt to halve losses in the unit to a mere $1bn this year. Bloomberg predicts that Goldman's emphasis will be on the broader asset and wealth management (AWM) unit tomorrow instead. The hope is that AWM will become the engine that smooths out Goldman's lumpy trading revenues and generates profits irrespective of the prevailing winds. All will become clear in around 24 hours.
While Goldman struggles against its semi-self inflicted wounds, some of its big US rivals are in finer fettle. Morgan Stanley's share price fell a mere 1% in 2022 (compared to Goldman's 5%) as MS was vaunted for the stability of its own asset and wealth management revenues. Were it not for Morgan Stanley's apparent circumspection in the last bonus round, everyone might be rushing to the house of Gorman now. But Morgan Stanley's banking analysts have other ideas: they think JPMorgan is a great bet.
Betsy Graseck, Morgan Stanley's global head of banks and diversified finance research, is predicting that JPMorgan's market cap could more than double to $1 trillion by 2030. Her new price target for the bank's stock implies at 24% increase this year alone. High interest rates are good for JPMorgan, says Graseck. The bank is"an underappreciated rate play.” She says it will benefit from stronger net interest income, along with improved fees and efficiencies.
If Graseck is right, now might be a good time to get deferred bonuses delineated in JPMorgan stock. JPM made some tiny job cuts last week and has trimmed a few tech staff, but is still busy hiring. "I tend not to stop growing because you have a recession," declared CEO Jamie Dimon last month. Graseck's verdict suggests staff at rival banks might want to make the most of the opportunity.
Separately, whether it's inflation or lifestyle inflation or both, some mid-ranking bankers on seemingly large salaries are struggling to get by.
The Financial Times reports that respondents to its recent bonus survey are feeling cautious about their finances. Bonuses are smaller than before and prices are higher. One banker in his 40s said he expected to never receive another pay rise. Others were saving for pensions or school fees. Some of the most poignant tales came from bankers in their 30s, however. One cited “increasing reliance on bonus money as disposable income rather than for long-term investing purposes.” Another said bonuses were being sucked by higher mortgage payments: "This is unfortunately the reality for many. Bonuses don’t necessarily mean extra cash, especially since all of these costs have risen so massively," he mused.
Blackstone CEO Stephen Schwarzman was paid $1bn last year. This was 50x more than Jamie Dimon and David Solomon at JPMorgan Chase and Goldman Sachs. Joseph Baratta, head of Blackstone’s private equity unit, and CFO Michael Chae, its chief financial officer, both received more than $50m. The average Blackstone employee received $1m (down from $2m in 2021). (Financial Times)
Millennium hired ex-Trafigura metal derivatives trader Nicholas Hanley and Saurabh Sharma from DRW for a commodities pod. (Bloomberg)
Alison Harding-Jones, the head of Citi's M&A business in Europe, the Middle East and Africa, is leaving at the end of next month. No one knows where she's going. (Financial Times)
Chinese TMT M&A banker Bao Fan has been found "cooperating in an investigation being carried out by certain authorities in the People’s Republic of China.” (Bloomberg)
UK financial sponsors are eternally optimistic. "We believe that private equity will be much more selective [in] taking advantage of severely undervalued, high-quality UK companies, as opposed to the last two years’ free-for-all. If bond yields start falling, we could see the M&A market start to thaw quite quickly." (The Times)
This is not a good time to be a consultant working with investment banks. - Unicredit, Credit Suisse and UBS are also slashing spending on consultants. (Financial Times)
Citigroup and Goldman Sachs are restricting the use of AI-powered bot ChatGPT. (Financial News)
Adults need seven to nine hours' sleep per night, including two hours' REM sleep. Lack of REM sleep is associated with slow thinking, depression, and problems learning and processing emotional experiences. (New York Times)
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