Macaskill on markets: Banking jobs – it’s the non-core life for me
There is a vogue among senior investment bankers to look for a switch to a job with one of the private equity firms that are morphing into shadow finance players with an appetite for assets of all kinds.
Mike Cavanagh recently swapped his position as co-head of investment banking and joint heir-apparent to the top job at JPMorgan for a comparable role at Carlyle, and soon afterwards Jeff Mayer traded in a slot as US corporate and investment bank head at Deutsche Bank for a job with Cerberus.
There is an obvious appeal to these moves. Long-term compensation prospects are certainly better at shadow finance firms. And the burden of regulatory compliance is lighter, for now at least.
But bankers may be under-estimating the appeal of a switch to a non-core or ‘bad’ bank, if a move is on offer at their own institution. When Barclays announced in May that it was establishing a non-core investment bank to house unwanted assets, Eric Bommensath’s move from co-CEO of investment banking to head of the new bad bank was widely interpreted as a demotion.
Bommensath had been subject to off-the-record denigration for some time. He was introverted, according to some reports, he was unquestionably French and he had equally undeniably spent much of his career trading derivatives. It was difficult to escape the conclusion that some of Bommensath’s colleagues in the non-trading side of Barclays, such as its corporate financiers, were briefing against him to pressure
chief executive Antony Jenkins into making management changes to accompany the bank’s shift in emphasis towards origination. It might have seemed like mission accomplished to these partisans when Bommensath was shifted to the bad bank. Admittedly, Skip McGee, the US chief executive and poster boy for advisory banker bluster, also left Barclays in apparent dudgeon that he did not get a job running the entire investment bank. But at least Tom King, another American M&A specialist, took over as sole chief executive of the investment bank.
Bommensath might have ended up with the better deal, however, as there are many upsides to life as a non-core banker.
The hours are better, for one thing. Extended days are inescapable in banking, but it is the advisory or ‘pure’ investment banking side of the business that specializes in pointless, almost fetishistic, time serving. Junior M&A bankers can spend so long pretending to be busy while not actually closing deals that it becomes a habit they find hard to shake later in their careers. Trading, by contrast, involves making calls in real time. And running a non-core bank boils down to ensuring that existing positions do not go bad (or get any worse), while working to secure attractive terms on a few big disposals of assets. There is no reason for that job to stretch into the evening.
The compensation might not be too unattractive, either. Bommensath is unlikely to get a deal as sweet as the Protium structure that Barclays used to offload around $12 billion of bad assets to former employees in 2009. Protium had to be unwound a couple of years later, at the cost of big write-offs and embarrassment for the bank. But he might well get a healthy bonus for beating a set of performance metrics for the non-core bank that do not have to be disclosed publicly. He will also be able to deal with any enquiries from regulators surrounding the myriad potential scandals involving Barclays and other banks without having to simultaneously answer queries from clients.
The recent rise to the executive suite by advisory bankers at many big firms is in part due to understandable concern at board level that employees with a background in sales and trading will be caught up in regulatory investigations and blamed for supervisory failures, even if they are not directly implicated in malpractice.
For a trading veteran it is surely better to cope with any regulatory problems from a non-core bank position with a low profile, rather than as an obvious potential scapegoat for the next breaking scandal.
Of course, Bommensath might decide that even a non-core banking job at Barclays is not what he wants, and decide to bow out of the firm entirely after a decent interval. Either way, he will likely never again have to sit through a meeting with Skip McGee.