Morning Coffee: Jefferies' bonus changes risk undermining its appeal to bankers. PWC's disappearing graduate jobs warning

When the Financial Times wrote about how wonderful it is to work at Evercore last year, one thing stood out:  people at Evercore liked the way they were paid. The bank has an "eat what you kill" approach to bonuses, which adds transparency. Top bankers there keep 25% of the fees they generate, and this is good. There's a big incentive to "grow the pie" one Evercore banker told the FT. 

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It's long been a bit similar at Jefferies, where bonuses have had two distinguishing features. At Jefferies, bonuses have a) been paid in cash, with a clawback if people leave and b) been paid as a reward for individual performance rather than that of groups. Both features help explain how Jefferies hired over a hundred managing directors a few years ago, and why most have stayed. Things are, however, changing.

Jefferies has already begun moving to deferred stock bonuses for its managing directors, who earn $2m each on average in London. The Financial Times reports today that the bank is now also embracing an ethos of collaboration and telling its managing directors that collaborating will maximize bonuses. The mechanics of Jefferies' new approach are not clear, but at rival banks the method is not always pretty.

Collaborative bonuses usually mean that instead of simply paying one managing director for bringing in a deal, everyone involved in originating it gets a share of the fee pie. In the words of one managing director at a rival bank, this is a source of "perennial discussion" and wrangling over who was responsible. Was it the broad coverage banker? Or the banker in, say, equity or debt capital markets? 

Even in Evercore's sunny uplands, there are issues. There's a small collaborative element to Evercore bonuses too, but bankers there also compete to demonstrate their involvement in deals. In pursuit of their 25% fee cut, the FT said Evercore's MDs are invited to submitted numbers for how much revenue they generate each year. Each year, it said the sum of the numbers exceeds Evercore's revenues. 

Jefferies insiders tell us there is already internal wrangling about how deal credits are allocated. The new collaborative ethos could make this better, or worse...  

Separately, Business Insider has an article suggesting hard times are ahead for students hoping for professional jobs.

Business Insider has seen a presentation from PWC which says the Big Four firm plans to cut its US graduate intake by 39% between 2025 and 2028. This is both because the students it hires are no longer leaving and because AI is being deployed to do the work of entry level recruits.

 "We are being prudent by decreasing our campus hiring goals in certain parts of our firm and leaving space for us to reevaluate our needs as necessary to meet the evolving demands of our business and our clients," says PWC, opaquely.  

Meanwhile...

Bank of America promoted Faiz Ahmad and Mike Joo to be co-heads of global investment banking. Ahmad was previously co-head of global capital markets, and Joo was formerly its head of North America global corporate and investment banking. (Reuters) 

Richard Fagan, who spent 15 years at HSBC latterly leading its UK ECM business has found a new job (after presumably being let go). He's joining Shore Capital. (Financial News) 

Citadel Securities is expanding in India. It hired Prajual Maheshwari  from high-frequency trading firm Aakraya Research. (Bloomberg) 

White Elk Partners, a hedge fund founded by former Brevan Howard and BlueCrest portfolio manager Carl Radford, has opened an office in Sydney and hired ex-Citi FX trader John Nihill. (Financial News) 

Deutsche Bank and Michele Faissola are going to mandatory mediation over his allegedly ruined career in relation to the Banca Monte dei Paschi case. Neither seems inclined to compromise. Deutsche Bank, for example, says Faissola's claims are “entirely without merit" and that it will defend itself against them "robustly, including disputing inflated, unrealistic alleged losses.” (Bloomberg) 

How to vibe code. - First ask, "Hey, why is this thing the way it is?"  This forces the AI to do a bit of its own research first, and the answer helps inform the prompt that human engineers write. (Wired) 

The office is a place of productivity theatre and you're better off leaving work early (and resuming work at home) than starting late. (WSJ) 

What to say when people ask why you've been out of work for so long. “You don’t have to show that you were curing cancer or something. Sometimes I will suggest people say, ‘You know, I wanted to take a little time to think about what would be the best next step for me, what would be a great long-term fit. And here’s why I think this job meets those criteria.” (Bloomberg) 

You can't get Meta's $100m AI jobs any more. It has a hiring freeze. (WSJ) 

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