Morning Coffee: Bankers' new boss removes free breakfasts and cracks the whip. Boutique banks' expensive MDs are a problem

There is a long history of bankers working for European institutions in Asia, far from the eye of the mother ship, having a fine old time. When ex-Deutsche Bank CEO John Cryan took a charter flight to meet Gunit Chadha, Deutsche's APAC CEO, in Singapore in 2016, for example, Chadha arranged to meet in a fancy hotel restaurant beside a "spectacular swimming pool." The cost-cutting Cryan was not impressed. One month later, Chadha was out.

Something similar seems to have happened at Santander. In January, the Spanish bank transplanted Alberto Rivero, its Spanish speaking former head of Peruvian corporate and investment banking to Singapore. Seven months later, Rivero is cleaning things up.

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In his new Singapore seat, the Financial Times reports that Rivero has dismissed the (unnamed) Santander Beijing branch manager and begun cutting costs. There will be no more complimentary breakfasts. There will be no more official car services. No more frivolous business travel. 

At the same time, the FT says Rivero is engaged in some HSBC-style stricter scrutiny of the bankers he's inherited. When ex-Goldman Sachs banker Matthew Westerman arrived at HSBC in 2016, Westerman promptly set about firing people and monitoring how much work HSBC's banking managing directors (MDs) were really doing. This did not go down well. Westerman himself was out 19 months later. 

Rivero's stint at Santander in Singapore may be more enduring. He's been at the Spanish bank since 2018 and is not a foreign implant in the way that Westerman was at HSBC. Any whip cracking in Singapore is therefore likely to be with the mandate of Madrid and the board. Santander bankers' whose breakfasts and drivers have been removed and who are being asked to justify their existence, need to get with the new reality.

Separately, boutique banks like Evercore, Moelis, PJT and Lazard have been hiring a lot of bankers and the Financial Times notes that the hiring has yet to pay off. 

The FT says some of the boutiques in question have been luring people with guaranteed minimum pay for two years, plus a promise of 25%-30% of the fees they generate on deals. 

Deals are coming in, but seemingly not fast enough to outweigh the increased costs from all this hiring. At Lazard, for example, the cost income ratio was 69% in the first quarter and the aspiration to get this below 60% has been dropped. At Perella Weinberg, net income fell by 91% year-on-year in the first quarter. 

Perella is now cutting expensive but obsolete senior staff. However, the FT says the cost cutting impetus is predictably also focused elsewhere. AI is being used to replace junior bankers. Senior people who can bring in deals are mostly safe.

Meanwhile...

Merger arbitrage traders who can predict whether deals will close are receiving a "complexity premium" in their pay. Merger arb now requires an accurate assessment of antitrust law, plus politics, plus industrial policy. Pentwater Capita, for example, earned a large windfall betting that Nippon Steel’s $15bn acquisition of US Steel would complete. (Financial Times) 

Cantor opened an Abu Dhabi office in December and now it's building a team in the Middle East run by Tom Goodale from Stifel. 10 other Stifel people joined too. (Bloomberg) 

Chris Hogbin is the chief executive of Lazard Asset Management. He is also a fan of AI. He runs regular "show and tell" calls on Fridays to discuss how AI is being used in the company. “We had a couple of super users and a lot of people who were kind of waiting.” People dial in on Friday evenings. (Bloomberg)

Senior bankers need to engage with journalists. "I recall one previous CEO at HSBC giving, after some perceived grievance, such responses to a senior FT journalist. It was excruciating to witness and did the bank no favours." (IFR)

BNP Paribas hired Kavi Gupta from Jain Global. Gupta will work alongside Heather Oricco, BNP's head of FICC sales Americas. (Bloomberg) 

Deutsche Bank is ramping up hiring in the Middle East and opening an office in Saudi Arabia. (Bloomberg) 

Citi is hiring commercial bankers in the north ahead of Andy Burnham's arrival. James Morris, head of Citi’s UK commercial bank, said: “We’ve put bankers in the North of England. I think you can see there’s a shift which will only continue now with the Government moving to the knowledge economy from our traditional manufacturing [in those areas]." (Telegraph) 

Thrusting ex-HSBC chairman Mark Tucker is now chair at insurance group AIA, where he was once CEO. He is being heavily interventionist and has participated in internal meetings while reviewing structures and efficiency. This is upsetting some people. (Bloomberg) 

The OECD thinks a 10 percentage-point increase in the prevalence of non-compete clauses in an industry is associated with a 1.9% decline in the level of labour productivity. (Financial Times) 

Banks like hiring top sports people because sports people combine confidence, humility,, dealing with failure, striving to improve, risk taking, challenging assumptions and an ability to receive direct feedback. Maybe they need more of them. (FT) 

Robert Ebert, Deutsche Bank’s former head of equities for Asia-Pacific, was earning £3.7m a year until the brakes failed on his Ferrari and he killed a security guard and was convicted of causing death by dangerous driving. Now he earns £80k and wants to sue Ferrari for alleged brake problems. (Telegraph) 

23-year-old British tennis player Arthur Fery is the son of hedge fund manager Loic Fery, founder of Chenevari Investment Partners. (Bloomberg) 

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