Morning Coffee: 2022's banking bonuses were the same as 2007's. McKinsey & Co. may be coming (back) to Credit Suisse
Even at low rates of inflation, the general expectation is that pay will rise. And indeed, between 2007 and 2022, median household income in America increased by around 64%. When it comes to bonuses in New York's securities industry, however, the path is not so straight.
New figures from the Wall Street Comptroller's office reveal the gyrations of banking bonus compensation. There are good years, and bad years, and a good year's bonus may still represent a high point decades after the event.
In this sense, people working in the securities industry in 2006 and 2007 were extremely lucky. At $191k in 2006 and $178k in 2007, their average individual bonuses were at multi-decade highs. It wasn't until the (retrospectively evident) massive boom years of 2020 and 2021 that bonuses paid by New York banks to their employees blasted through these earlier records to hit averages $214k and $240k.
By comparison, last year's $177k bonuses look like a terrible letdown. And yet, as the comptroller's chart below shows, there were only five years in the last 20 when average bonuses were any higher.
If you work in banking, there is a lesson in this, and it is probably a simple one: even after 2022, bonuses may have a lot further to fall. Precedent suggests that following major market events (the bursting of the dot com bubble, the financial crisis), bonuses don't just fall for one year but for two. $177k per head was still pretty generous for 2022, even if it was the same as the average bonus 15 years previously.
Source: New York State Comptroller
Separately, UBS is going to need some help digesting Credit Suisse, and that help is likely to come from consulting firms like McKinsey & Co.
The Financial Times reports that UBS's outgoing CEO Ralph Hamers is especially partial to McKinsey & Co. and even sat on is advisory board. However, the integration project has been put out to tender, with multiple consultancies currently preparing pitches and Mike Dargan, the UBS chief digital and information officer who's running the integration with Francesca McDonagh, running the process.
McKinsey & Co. will presumably be included in the invites. The consulting firm knows both sides of the table well. - Former Credit Suisse CEO Tidjane Thiam, was a former McKinsey man, and ex-Credit Suisse chairman António Horta-Osório was very partial to McKinsey & Co. and called on them to help draw up a new strategy for the bank, before he was ejected in January 2022. McKinsey itself could probably do with the work - banks have been trimming their spending on consultants, and McKinsey is in the process of making its largest round of job cuts for five years.
Entire teams at Credit Suisse want to move. “UBS are mistaken to conclude that any of the good technology bankers at Credit Suisse will go there just because it is a safe landing." (Financial News)
Where is Zoltan Poszar, the former senior adviser to the United States Treasury and expert on the banking system and its crises? He's an MD at Credit Suisse and has been unable to opine but this is what he would have said.... (Crisesnotes)
Swiss regulators wanted Sergio Ermotti to come back and lead UBS and UBS chairman Colm Kelleher called Ermotti the day after the merger was announced. (Bloomberg)
Steve Schwarzman says it's not a banking crisis. “We have just an interim issue with interest rates being up and we have a deposit issue caused by technology. And these are both solvable problems for the vast number of banks.” (Bloomberg)
Having earned "f*ck you money" in the 1980s, Nassim Nicholas Taleb has been liberated to pursue a life of reading, research and flaneurism. (Spectator)
How to handle an employee who’s incompetent but nice. (Glyph)
Ex-Credit Suisse CEO Tidjane Thiam says speculators are trying to ruin Deutsche Bank. “After the euro market closes speculators go and short the CDS; increase the spread on the CDS, then you get articles saying that Deutsche is going bankrupt, and then they go into the ADR market, which is very illiquid, where they take a position and make good money.” (Bloomberg)
Revolut's board don't like the statement made by the company saying its audit was fine. "It was written by people who probably didn’t fully understand the nuancing of an audit opinion." (Financial Times)
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