IF THE PENDULUM for most major investment banks has broadly swung away from rehab towards investing in growth, not all banks have felt the need to reboot senior management ranks to reflect this significant shift in opportunity and mindset.
You’d have thought capturing emerging business opportunities calls for a different management approach compared with the one necessary for downsizing, closing, cutting costs and resolving legacy issues. But reviewing 2017 senior management changes or organisational tweaks suggests most banks are content with the status quo, perhaps reflecting painful re-orgs of recent years.
That being the case, should rivals be concerned that Goldman Sachs underwent a major executive shift just ahead of an upturn in a rate cycle that will boost margins and potentially lift trading velocity – and the formidable Jim Esposito and Justin Gmelich get to work trouble-shooting notable 2017 trading under-performance as newly appointed FICC co-COOs?
Goldman certainly wins the prize for the most seamless generational and management shift of the year. It only involved a small cast of long-term insiders but still … CFO Harvey Schwartz and dance music spinner DJ D-Sol (aka IBD co-head David Solomon) took Gary Cohn’s CEO-in-waiting slots as presidents and co-chief operating officers.
Richard Gnodde, Goldman Sachs International CEO and the other IBD co-head, became vice-chairman. So did global securities co-head Pablo Salame. They populate that executive layer vacated by the retirements of Michael Sherwood, Mark Schwartz and John Weinberg.
Wunderkinder Gregg Lemkau and Marc Nachmann, meanwhile, were bumped up a rung, joining John Waldron as IBD co-heads.
In re-calibrating its upper ranks, Goldman also made an appointment that could set the scene for the industry: Marty Chavez got the CFO gig. This is notable in that it marked the first time an executive with an avowedly entrepreneurial tech background became CFO of a major financial institution. Given where the industry is headed (digitisation, AI, cloud computing, big data, blockchain) investment banking’s upper echelons are woefully short of technology-enabled executives.
TAKING RISKS
At Barclays, Tim Throsby set about putting his mark on the investment bank, switching a raft of senior bankers into new or upgraded positions, bringing in senior talent, encouraging staff to lose their aversion to risk, and starting to invest in growth areas (including rates, FX and equities).
During the year, Joe McGrath became global head of banking, Jean-Francois Astier global head of capital markets, Jill Schwartz global head of leveraged finance, John Mahon head of the corporate bank, and Travis Barnes and Mark Lewellen co-heads of DCM and risk solutions. Throsby hired Stephen Dainton from Credit Suisse as global head of equities and Michael Lublinsky from Brevan Howard to run macro trading. Throsby looks like a man on a mission.
Deutsche Bank, the restructuring laggard, continued to battle the elements under the fatigued eye of John Cryan, who was forced into a €8bn rights issue as plans to offload Postbank were reversed. Marcus Schenck, the new CIB co-head with Garth Ritchie, consolidated his power base, taking on a new role as group co-president alongside Christian Sewing, co-head of the private and commercial bank. Citigroup treasurer James von Moltke joined as CFO to fill Schenck’s old slot.
Schenck and Ritchie set about re-shaping their division, setting up a global capital markets unit (run by Alexander von zur Muehlen and Mark Fedorcik) to accommodate ECM, DCM, leveraged finance and financing solutions; establishing a financial resource management unit (run by Chris Whitman) to allocate capital efficiently across banking and trading; and tapping Keenan Altunis and Stefan Hoops to co-run the institutional client group. And there was a merry-go-round of related product and geographical tweaks.
Re-organising deckchairs on the Titanic? Since the restructuring of the investment bank will take another two to three years, according to Ritchie, only time will tell.
BREAK-UP
Talking of banks in restructuring, RBR Capital Advisors’ call to break up Credit Suisse got headlines but garnered little support. Tidjane Thiam defiantly rejected the call and declared his strategy, bolstered by a second capital increase (for SFr4.4bn) under his watch, to be working as the bank claws its way to what the CEO said would be an attractive bank when his restructuring – which he said was progressing at an enormous pace – is complete post-2018.
If Goldman upgraded with the whoosh of a Rolls Royce Phantom, HSBC was more Skoda Octavia. In a year that should have been remembered for its well-planned CEO succession that will see retail banking and wealth management head John Flint take the baton from Stuart Gulliver; or for the well-received appointment of first-time external chairman Mark Tucker, it’ll actually be remembered for the departure of former Goldmanite Matthew Westerman as co-head of banking, and an IB dream that lasted just 20 months.
Westerman’s ouster caused a media frenzy; with coverage focusing on how delighted senior HSBC bankers were to see the back of him. That’s arguably more a comment on them than on him. He may have adopted an abrasive demeanour but then again he’d been hired specifically to shake the banking division out of its smug complacency and self-satisfied collegiality.
He hired in talent, fired under-performers, rebalanced the bonus pool and stacked promotions to favour top performers to turbocharge a platform that simply didn’t have enough good people. I defy anyone to argue that turning HSBC into a more thrustingly meritocratic environment was a wrong approach if your mission is to garner a bigger wallet share of advisory-led corporate finance work in intensely competitive areas such as ECM and M&A (where HSBC veers between being pedestrian and irrelevant).
Even in DCM, where HSBC has a solid presence, should it be doing better given how much balance sheet the bank cheaply rents to clients? With Gulliver already having one foot out of the door – and GBM chief Samir Assaf likely to follow him if you believe the chatter – it looks like support for Goldmanisation just evaporated.
Talking of high-profile departures, another one particularly worth noting is JP Morgan COO Matt Zames, a plausible successor to Jamie Dimon, who walked because he wanted to run his own organisation rather than wait for Dimon to retire. That’s become a popular JPM refrain in recent years. Looks like Jamie will outlive them all.
