by John Anderson
In one of his many books, 'The wine-dark sea,' noted maritime author Patrick O’Brian skilfully recounts how an early 19th century British navy captain deals with finding his ship in a becalmed sea.
While O’Brian spends pages narrating the anguish of the situation, allow me to portray the remedy in a succinct but far less elegant fashion than the author: when the wind doesn't come, you plonk a bunch of sailors in a boat that tows the ship until you find it.
While it’s highly unlikely that the communications heads of several of the leading investment banks are in possession of the Admiralty’s manual on seamanship, there is a chance they spend their time looking for people to row them out of the doldrums.
Banks such as HSBC, Credit Suisse, Deutsche and Barclays are in the awkward position of having little good substantive news with which to counter the existential gridlock they’re facing: what do they want to be when they grow up?
While Goldman Sachs and JPMorgan are safely bedded down into their strategies, into their hirings and into the revenues, the others are playing a strange game of trying to sail into the future without knowing where they are going nor what shape they should be in to get there.
The phenomenon raises an interesting, practical issue: How does a comms team operate under conditions of little good news and huge potential for bad?
The answer can be found in the larger environment of investment banking. Look around you: bonds are being underwritten, equity is being raised and there is still no shortage of interesting structured products coming into the market. If you spent your day on a trading desk or looking at the wires, you would think that, although volumes are a bit lower, the world hasn’t really changed.
But if you step up to, say, about 35,000 feet, we know the picture is different.
What to do?
The answer is to embrace the psychopathic nature of the industry. I’m not being facetious. A little psychopathy is not a bad thing if it allows you to keep moving forward.
Standard Chartered is a good example of a bank that, faced with turmoil at the top and a heavy-handed redundancy programme, simply stared ahead and regaled us with bond deals and desk hirings wherever it could find them. If you read the desk-level press releases from StanChart, you would have thought there was nothing amiss in the senior ranks.
Today the banks faced with this challenge are Deutsche and Credit Suisse.
Deutsche is buckling. It is on its way to a world record for the most number of reorganizations in a year, yet the bank puts on a brave face that suggests everything is control.
Look at its website: the press releases keep coming, the sponsorships are promoted and the research is all exalted. More tellingly, look at co-CEO John Cryan’s message to the troops of February 9. Full of the type of corporate cheerleading and reality-fudging that hasn’t changed in decades in the industry, Cryan's despatch tells us that the bank is rock solid, hirings continue, the strategy is sound and there’s a deep financial underpinning.
If you are out for a drink in the City one night, you might get another story from a Deutsche trader in his cups. The bank has struggled with its FICC group (like everyone else); it’s clubfooted in retail; and the only reason there’s any spark in serving the vaunted Mittlestand is because the depressed euro allows it to keep trading with China.
That brings us to Credit Suisse. Take a long look at this firm. It’s amazing. When dinosaurs ruled the Earth, Alan Wheat played Johnny Depp playing Captain Jack Sparrow and turned CS into the most swashbuckling derivatives shop in the land. Wheat’s DNA spread to the rest of the bank; it became about as un-Swiss as you can image.
Then Brady Dougan came along, ethics were introduced and lo and behold it overtook UBS as a decent place to work and do business. Unfortunately, Dougan’s magic didn’t last after 2008. Now we must watch Tidjane Thiam try to figure things out.
Thiam, who is probably trying to remember the days not so many months ago when good fortune was at his back, embraced his psychopathy when he allowed the following paragraph into the shareholders letter this year: “Our new geographic focus will enable us to be more agile in meeting our clients’ needs by bringing together our capabilities in wealth management and investment banking. The new organization gives our business heads clearer accountability both in terms of managing their clients and the resources they require to deliver more value to their clients.”
Wow. If I had penny for every time I wrote something like that I wouldn’t have to write this column.
We will just have to see if any of the myriad institutional investors who have deserted the stock will be dazzled by such verbiage.
Because you see, bankers may be psychopaths, but savvy investors aren’t.