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Morning Coffee: Morgan Stanley job cuts target the usual suspects. Ex-Credit Suisse people dominate this growing market

The announcement looked potentially a bit surprising – Ted Pick’s first big move as the new CEO of Morgan Stanley is to cut hundreds of jobs in the Wealth Management division.  Since that division is generally regarded as the company’s crown jewels, and is run by his previous rival for the top job, Andy Saperstein, why isn’t it being invested in rather than cut back?

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The answer is that the cuts follow a theme that’s becoming surprisingly familiar. For one thing, they’re not really all that big – Morgan Stanley Wealth Management is a huge business, including all the wirehouse brokers and E*Trade.  “Hundreds” of jobs going apparently translates to a percentage reduction of less than 1%.

But more importantly, Andy Saperstein has little reason to complain, because the cuts are overwhelmingly targeted at “non-customer facing” and support roles. This is a theme familiar from the Citi and Deutsche cost reduction programmes, and is expected to also be seen at Barclays.  Headline numbers range from quite big to quite small, but nobody is cutting dealmakers or revenue generators – it’s all aimed at support staff.

Why? One possible explanation might be that we are finally seeing delivery on projects from a few years ago.  Back in 2021 and 2022, the absolute hottest market in banking was for cloud computing specialists, as every big bank was beginning projects to migrate systems to the cloud.  The thing about big projects is that eventually they end. And the point of migrating something to the cloud is that it’s meant to save money – specifically, it saves money because it requires fewer staff to operate and maintain a cloud application than the same thing running on “legacy” systems.

So there are two areas of headcount reduction which might be in the process of maturing.  First, as the cloud projects deliver, the final stage is to shut down the legacy systems and say goodbye to the people who worked on them.  And second, many of the cloud specialists themselves were hired for a good time rather than a long time; once the project is complete, some of them might be moved on to the next big migration, but some of them might have coded themselves out of a job.

This sort of development cycle is pretty familiar in the IT industry; any software engineer with a few grey hairs will have memories of a system they worked on at the start of their career, which doesn’t exist anymore.  It also means that the announcements of layoffs that we’ve been hearing over the last few months might not be the whole story. 

For obvious reasons, chief executives are keener to announce cost-cutting programs than cost increasing programs, but the overall demand for banking IT staff has lots of different drivers, many of them regulatory.  It wouldn’t be the first time in banking history that a year of job cuts ended up with a higher headcount than at the start.

Elsewhere, it’s always worth keeping an eye on the career progress of “good teams from bad banks”.  Alumni of Michael Milken’s DLJ leveraged finance team more or less created the modern private equity industry, for example.  The highest ranks at Softbank have had disproportionately many members of the unofficial “Deutsche Bank Cricket Club”.  And now it seems that there might be a new alumni network forming.

Credit Suisse was always strong in CLOs, and although UBS has tried to keep as much of the franchise together as possible, many bankers jumped ship.  And so CIBC has Gabrielle Garcia and Brad Larson, Santander has Joel Kent and SocGen has Michael Malek.  Scotiabank and Deutsche have also recently hired CS alumni, and it seems that a lot of these firms have done so with intentions of gaining market share.

Networks like this can often be surprisingly persistent; bankers who have bonded through adversity have a built-in level of trust with one another, and this can be very useful in getting deals done.  Events like the Credit Suisse collapse which have the effect of suddenly spreading former colleagues across the market are one of the ways in which culture and practices are transmitted and adopted.  Sometimes, the best name to have on your CV is a name that’s considered “bad” by everyone except those who are in the know.

Meanwhile …

Jeff Talpins of Element Capital is handing investors their money back in order to shrink the size of his fund and improve performance.  For the time being, though, although Element will “mostly” run “internal” money it’s not transforming into a family office like BlueCrest; there will still be external investors and consequently most of the compliance staff will presumably still be needed. (Bloomberg)

Citi is giving its Hong Kong staff the most “lucky money” to celebrate the Chinese new year out of any international bank; let’s see if it brings them luck. (SCMP)

Andrea Orcel is delivering the goods to employees as well as shareholders – although the bonus pool is skewed toward lower earners rather than wholesale bankers and risk-takers, it’s up 16% on last year. (Bloomberg)

So far, we aren’t aware of any bank making use of the weird, AI-derived personality quizzes created by Paradox.ai.  But since they are apparently now a requirement in order to get a job washing dishes at Olive Garden (you have to say how various cartoons with a blue alien in them make you feel), it’s surely only a matter of time. (404 Media)

It is better to be lucky than good; Sinisa Sorgic at Bright Trading saw Lyft’s stock price shoot up on the mistaken earnings report and – after something of a wild ride – ended up with a profit from short-selling it.  He admits that strictly speaking he should have cut his losses. (Bloomberg)

If you have an “AI Girlfriend” or boyfriend, for heavens’ sake don’t install it on your work phone, they are apparently incredible data breach and privacy compromise machines. (WIRED)

Have a confidential story, tip, or comment you’d like to share? Contact: sbutcher@efinancialcareers.com in the first instance. Whatsapp/Signal/Telegram also available (Telegram: @SarahButcher)

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AUTHORDaniel Davies Global Editor

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