A friend of mine is a successful banker. She is not happy at her current institution and went to discuss her career options with a senior banker who used to be her boss. The senior banker listened to her catalogue of woes: the under-investment in the business, the ubiquitous presence of fire-breathing regulators, and the shrivelling bonus pot not to mention claw-backs and anorexic cash payments. The senior banker, an American Wasp, who had once worked for a top Wall Street firm, tilted his head to one side, peered at my friend from beneath bushy eyebrows and drawled: "It is true that the sex has gone out of the game." My friend was both amused and shocked that a seasoned professional could be so politically incorrect. Nevertheless, we both agreed that he had summarized the state of the financial services industry perfectly.
Banking is no longer a growth sector. Nor is it an aspirational sector anymore. Puffed-up parents do not purr: "My son is an investment banker at Goldman Sachs." A mole muttered: "The regulators are back in control, but not in a good way." Sometimes its hard for a financier to know the rules of the game. Look at Ian Hannam. Hannam, a senior banker at JPMorgan Cazenove, resigned last April after being fined £450,000 by the Financial Services Authority for market abuse, even though most commentators felt the accusations were unjustified. Hannam is appealing against the FSAs decision.
A well-placed source muses: "This war of attrition will stop only when bankers earn the same as lawyers and doctors." I will be interested to see the public reaction this year to bank chief executives bonuses. In London, there are already murmurings of discontent that António Horta-Osório, chief executive of Lloyds Banking Group, might receive a 2012 long-term incentive payment of several million pounds while the bank itself will make a loss.
If you think about it, many bank chiefs (or at least those who were around for the whole of the year) have stumbled. JPMorgans Jamie Dimon was undermined by the trading losses sustained by Bruno Iskil, the so-called London Whale. Both HSBCs Stuart Gulliver and Standard Chartereds Peter Sands lost credibility as their organizations were fined large amounts for money laundering. Brady Dougan, over at Credit Suisse, had a terrible year as the share price flagged and the firms strategy was questioned.
The sighting of Bob Diamond prompted a private equity chief executive to express a different view. His analysis of the Barclays brouhaha last year was that "foreign" chief executives who manage banks should be on their guard. "Its all about the regulators now," he opined. "They have to like you and youve got to be culturally aligned with them. Thats what ultimately did for Bob and maybe also Vikram Pandit, over at Citi. Brady Dougan and Anshu Jain might need to watch their backs. Having said all that, I still think Diamonds acquisition of Lehmans broker-dealer operations, at the bottom of the market, will go down in history as one of the greatest trades ever."
Many banks are still struggling with a hangover from the credit crunch. In my December 2012 column, I took a brief look at the bizarre events at Renaissance Capital, which culminated in the founder, Stephen Jennings, a New Zealander, being ejected from the firm that he had founded. Last November, Mikhail Prokhorov, the billionaire owner of the Onexim group, bought the remaining 50% of the business that he didnt already own. "Stephen Jennings...has retreated from his own firm," I wrote. "To the outsider, this reorganization seems odd. Renaissance must have been finding the going tough...Was it haemorrhaging money?... This deal has the whiff of panic about it."
Recently an article from Forbes magazine probed the circumstances of the Renaissance Capital sale. Delicious titbits emerge of high-risk repo trades, oligarchs jostling for power, reckless over-investment in Africa and "cleansing exercises" when mass dismissals occurred. "The flow of employees dismissed and hired was seemingly never-ending. Within the company, it seemed everybody was seeking replacements for each other," the article states. Salacious details aside, I stick by the conclusion that I reached in my December column: foreigners will find it increasingly tough to challenge, let alone dominate, national financial players in the emerging markets.