Morning Coffee: Deutsche Bank is placating juniors while keeping costs down. Bankers who went to Coinbase are finding new jobs
Deutsche Bank has increased starting salaries for first year analysts to $110k and basic compensation for second years to $125k. Not so long ago, this would have been a big piece of industry news, underlining the bargaining power of junior bankers and the pressure on employers to keep up the flow of deals. Now it feels almost nostalgic, conjuring up the spirit of 2021 as much as Driver’s License, Don’t Look Up or PCR tests.
Because, of course, 2022 was the year in which junior bankers learned that basic pay is nice, but total compensation is what matters. A 100% bonus on a $75k base is pretty much the same amount of money as a 40% bonus on a $110k base, and in many ways all you gain from the latter is a pretty clear understanding that if cost cutting at the junior levels becomes necessary, it will need to be done through headcount rather than variable pay.
So Deutsche’s decision to be very late to the party, bringing basic junior pay into line with peers almost ten months later, could be seen as pretty smart. They maintain their employer brand and signal that they are still competing in the top rank for the best graduate talent, while saving ten months of the basic pay rise and having a total compensation cost outlook that’s no different from before. And the Deutsche juniors no longer feel that their classmates at other Wall Street banks have any bragging rights over them.
However, the way in which the Deutsche rises have been handed out might be a bit more interesting, as it cuts across some of the most sensitive debates that are likely to take place in the second half of this year. The new base salary structure apparently “applies to staff within Deutsche's corporate finance unit, but not its markets business”.
If revenues are below target as the end of the year draws near, there are two big decisions for a compensation committee to make. First, whether to concentrate limited resources on the top producers and rainmakers, or to invest in the future by paying the junior ranks. (Australia’s Barrenjoey has apparently taken the latter course). And second, given some areas of the bank will always have done better than others, there have to be delicate – or indelicate, depending on corporate culture – discussions about how much bonus pool is going to be transferred to even things out.
So, giving some money specifically to juniors, and doing so on one side of the sales & trading / capital markets & advisory divide but not the other has to be seen as part of the context for that year end debate. The fixed income traders will already be alert to the fact that their strong revenues will be subject to claims from other franchises, and now they may feel that they have to “top up” their own junior ranks to maintain parity of esteem. This is all going to get quite involved, across the entire industry, so it’s interesting to see Deutsche making some of the first chess moves.
Elsewhere, the “crypto winter” has seen a lot of former bankers made redundant from their new jobs, but things could be worse. The problems in crypto haven’t spread out to the whole fintech space, yet, let alone the wider financial industry, and that means that good people are still finding jobs. Jonathan Yam, for example, recently part of the last big clear-out at Coinbase, has now got a job as Chief Technology Officer at NASDAQ Private Markets, a bit less than eight weeks after getting his pink slip.
It's still a good market for financial tech talent. People who were working in development roles in crypto exchanges have been keeping their skills up to date and demonstrating the ability to think creatively and build systems at scale. The fact that the products and business models they were working on have turned out to be less viable than expected seems like a second order detail.
AMTD Digital, the Hong Kong investment bank, which had a larger market cap than Goldman Sachs for a short while after its IPO, seems to have regulators interested in it (although apparently some problems by the Securities and Futures Commission never result in charges or become public). (Bloomberg)
Lombard Odier is opening an office in Verbier “to catch existing clients on holiday and win new ones”. They will also be perfectly placed to act as a source of gossip about all the sales desk ski trips (Finews)
Citi has added two more hires to the digital assets team in its “Treasury and Trade Solutions” division. Ryan Rugg has come from IBM and David Cunningham from a regtech firm. (Coindesk)
For the first time, partners at PwC will be taking an average of more than £1m profit share this year, although ten per cent of that is a one-off gain on sale of a business. They’ve been warned, though, that inflation and growing headcount means that next year won’t be so generous. (Bloomberg)
If an algorithm is trained on racist data, it will probably grow up into a racist algorithm, and it’s not necessarily easy to tell when this has happened until it’s too late and there’s a huge legal case. The AI research community is looking at this problem with a degree of consternation. (WIRED)
Another kick for the poor old independent equity research industry – a decision by the SEC on the interaction between Europe’s MiFID and the US rules is going to make it much more difficult for international clients to pay them. A few independent stars might end up getting recruited back to the Street. (Institutional Investor)
If you’re ever tempted to think that bankers have it hard, consider the “manual scavengers” who clean and unblock sewage lines in India, having to fight off rats and snakes and avoid toxic gas buildups. It’s believed to be the worst job in the world. Yes, worse than financial sponsors coverage. (Daily Telegraph)
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