Morning Coffee: Hedonistic bankers accept a mandatory pay cut for the common good. Citadel interns have won the summer lottery
If anyone were to carry out a survey to find out what the best things about banking are, it’s likely that the top two answers would be the money, and the lifestyle. Unfortunately, when there’s a survey of the main reasons why people dislike bankers, it turns out these are also among the top answers.
The staff of Citic Securities might have more reason than most of us to ponder this fundamental paradox this week; according to Bloomberg they are having their pay cut by as much as 15%. The reason for this policy is not challenging markets but the fact that they are based in Beijing, and that the Central Commission for Discipline Inspection has been warning those in the industry that they need to get out of the “financial elite” mindset and cut back on their “hedonistic” ways. It’s part of the “common prosperity” campaign of President Xi Jinping, and in context it appears that bankers need to be quite a lot less uncommon.
One might think of this as a warning about the dangers of trying to be an investment banker in a Communist country. But is the capitalist world really so different? It’s not so long ago since Andrea Orcel lost out on the CEO job at Santander, precisely because the board there decided that the political optics of his pay package would not be acceptable. Western markets might not have a central commission for discipline inspection, but the concept is certainly not wholly alien; ten years after its financial crisis, Ireland still caps bankers’ pay.
And in fact, when it comes to the woes of bankers in mainland China, the common prosperity policy is way down the list. Citic hasn’t declared bonuses yet, but they were down more than 40% at its rival, China International Corporation. Headcount cuts as international banks rightsize after a few years of excessive hiring are likely to mean that quite a few bankers will be scaling back their hedonistic lifestyles too.
In fact, it doesn’t necessarily look as if the outlook for either employment or total comp is all that different between China, the rest of APAC and Europe or North America. What the Chinese banks are doing to maintain common prosperity, the Western banks are doing in order to maximise profits and keep their share prices up. As the old joke had it, under capitalism man is exploited by man; under communism, it’s the other way around.
Elsewhere, conditions for summer interns in the beating heart of capitalism at Citadel seem quite impossibly sweet. They are getting paid $5,000 a week, being given free accommodation in Chicago, New York or other financial centres, and kicking off with a week-long offsite in either Palm Beach (for the hedge fund) or Fort Lauderdale (for Citadel Securities). While they’re bonding in the sunshine, they will also be matched to “buddies” responsible for mentoring them and trained in how to “act like a leader – even as an intern”.
Obviously, the extreme attractiveness of this program means that it’s almost impossible to get on to it. There were 69,000 applications this year, up 65% on last year, and although it’s a large program by hedge fund standards, there are about 300 places (an acceptance rate of somewhat less than half a per cent). The good news is that it’s not all about academic excellence – being a chess grandmaster or a special forces soldier can also be a way in.
Perversely, of course, that very exclusiveness is part of the attraction of the program. Citadel recruits from top universities worldwide, and it is likely to appeal the most to people who are really driven to try to get things simply because they’re the most prestigious of their kind. It’s unlikely that there will be anyone at the party in Florida who applied because they thought it was the company that makes Warhammer figurines.
Andrea Orcel loves his job, he has confirmed to an investor conference. Now that all the unpleasantness and grumbling about his compensation package is in the past, he says that his strategic plan has “a lot further to go”, and that he’s “definitely up for more” if shareholders want to vote him another term when his contract comes up for renewal next year. (Reuters)
“BondGPT” is a specialised version of the chatbot which can answer any questions you might wish to ask about bonds (and which, hopefully, has some safeguards built into it to stop it from hallucinating fictitious coupons or credit terms, or things might get messy). Its promoters claim that it’s the future of AI-driven trading, albeit that they’ve been saying the same thing about the rest of their platform since 2020. (Business Insider)
Another sign of BNP Paribas building up strength in its UK advisory franchise, and another instance of a European bank hiring from the US bulge bracket – Jacqueline Taylor has gone from JP Morgan, where she led diversified industrial coverage, to be an MD at BNP. (Financial News)
If one career didn’t quite go in the way attended, you can always change geography and pivot. Hafize Gaye Erkan was until quite recently the co-CEO of First Republic Bank, and is now being seriously considered for the post of governor of the central bank of Turkey (a job where interest rate risk is also considerable). If she gets the appointment, it will presumably be after crafting the best “just seeking new challenges” interview answer in recent history. (Bloomberg)
A cautionary tale – even if your company has decided to go for a full-remote working policy, that might only last until a new CEO is appointed who thinks differently. In which case, it would be really inconvenient to have moved house across the country and sold your car. (WSJ)
The proverb about the clown car that drove into a gold mine seems apropos – the bankruptcy sale for FTX has become significantly more interesting due to the recent AI craze, as Sam Bankman-Fried invested in a startup called Anthropic, which Perella Weinberg is now shopping round at a valuation almost as rich as FTX itself used to enjoy. (Semafor)
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