By the autumn, firing sorry, parting company had become the new hiring, a heady weapon of potential. But are the people holding the strongest cards those actually in the firing line? After all, whats so wonderful about sitting tight and dealing with the headaches that remain from the heady days of credit exuberance, particularly when youve been earning historic bonuses for the past five years? Much better to slink off and lie low for a few months in the Bahamas or perfect your snow-boarding technique in Verbier. The New Year will almost certainly bring new opportunities.
Of course Osman Sermerci, Merrill Lynchs former global head of fixed income, who lost his job in October, might feel a bit low. His role lasted a meagre 14 months. However, hes in good company: the tenure of Citis co-head of markets and banking, Tom Maheras, is no more and the revolving door at UBS is turning so quickly its making me giddy.
In late September, a mole reports mingling with a select gathering of the rich and famous at Londons Serpentine Gallery. The purpose of the evening was to meet New Yorks mayor, Michael Bloomberg. Mole was apparently accosted by Huw Jenkins, the chief executive of UBSs investment bank, who seemed in excellent spirits. The next morning it was announced that Huw was no longer CEO, and had joined the also semi-detached John Costas as a special adviser. (Do they have adjoining offices on a dedicated special advisor floor? Wed love to eavesdrop on those conversations.)
Huw Jenkins, the chief executive of UBS investment bank seemed in excellent spirits. The next morning it was announced that Huw had lost his job. Judging from Huws happy demeanour, my theory is correct: Youre fired, is the new Youre free
This is what happens when you let amateurs comment on financial matters. So I have decided to compile (with the assistance of my erudite editor and an informal panel of bankers who know where the real power lies) my own list of the top financiers in London those individuals who wield true power and are both feared and respected by their peers. The "Abigail list of Londons it (or should that be hit) bankers" is published online now.
In Octobers column, I said I was concerned about Merrill Lynchs third-quarter profits. How right I was. Merrill wrote down $84 billion in the third quarter and posted a loss in excess of $ billion. Stan ONeal became the highest profile victim of the sub-prime crisis to date. This would seem to put Merrill near the top of a new league table: losses incurred because of the credit crunch. Merrill was the biggest underwriter of CDOs in 2006. One has to assume that Merrill is kitchen-sinking: being very conservative in a quarter where everyone got it wrong so that in future things will look much rosier.
Competitors are rubbing their hands with glee. "Merrills risk-management system must still be in nappies," a rival gloated. And dont forget that arch-enemy Goldman Sachss results were glossy, with third-quarter net income rising by 80%.
What is the problem at Merrill and who is to blame? Should we point the finger at chief executive Stan ONeal or at fixed-income subordinates such as Osman Semerci, and Dale Lattanzio, who left the firm in October. ONeal was ultimately responsible for the strategic direction of the firm and thus the decision to expand the CDO business must have been blessed by him. A source queried the decision to purchase sub-prime mortgage originator First Franklin. "Who the hell approved that decision? I cant believe you spend $1.3 billion without checking with the boss." This acquisition closed in December 2006 when it should have been clear that sub-prime was sinking faster than a depth-charged submarine.
The situation is made more complex because in May a new layer of senior management was interposed between ONeal and the business heads: Greg Fleming and Ahmass Fakahany became co-presidents of the firm. We thus have a bulging pyramid at Merrill and you have to ask who is in charge: ONeal or the two Fs? If (as I suspect) its ONeal, surely the new structure serves only to obfuscate accountability? I have many friends at Merrill and a deep admiration for ONeal but I long believed that there needs to be a trader in a more senior position. Fleming and Fakahany are not traders. Their background is investment banking or operations. Merrill needs to fix this lacuna and quickly. A senior source suggested: "The herds best move right now would be to hire Anshu Jain from Deutsche and anoint him as the heir apparent." That would certainly set the cat among the pigeons remember that Jain grew up at Merrill before he followed Edson Mitchell to Deutsche in the mid-1990s.
Respected and collegial commodities trader David Sobotka has been promoted to replace Semerci. Age is back in fashion at Merrill. Sobotka is 50, a generation more senior than 39-year-old Semerci. I have not met Sobotka. I had also never heard of him before October 5. I might be being arrogant but if I had never heard of him, is he the right man for a tough job in tough markets?
Paul and I have a bet on the price of gold. I am convinced that it is going to $1,000 before the end of 2008; he disagrees. I was feeling quite smug about my trading prescience until, a few evenings later, I sat next to Mick Davis, chief executive of Xstrata, one of the worlds largest mining companies. When I described the bet, a look of concern crossed Mr Daviss face: "I hope the stake is low, Abigail," he said. "Because I think youre going to lose."
Being a loser is not much fun. As predicted in this column, Barclays lost the battle for ABN Amro. Andrea Orcel, Merrills handsome head of global origination, bet the ranch on winning. He decided to remain on the sidelines when Barclays bid initially. Other bankers were dancing around Barclays chief executive, John Varley, like moths to a flame. Orcels strategy was high-risk, high-reward. When Royal Bank of Scotlands Sir Fred Goodwin and his continental partners finally entered the fray, Merrill was at their side: sole adviser to the consortium. And now that the consortium has won, Merrill picks up hefty fees and hefty league table volume. All five advisers to Barclays will get no league table apportionment as they lost.
Naguib Kherajs bet was less successful than Orcels. The former Barclays finance director was meant to leave the bank this spring. However, despite a splendid farewell party at 18th-century private palace Spencer House, Kheraj stayed on at Barclays to coordinate the bid for ABN Amro. That endeavour has failed and sources are speculating about Kherajs next career move. At the time his resignation was announced, cerebral Kheraj was rumoured to be considering a move in to private equity. I wrote at the time that when respected finance directors of public companies were linked with the leveraged buyout industry, that had to be the sell signal for the private equity sector. I was right of course but where does that leave Kheraj?
Recently, I have been going through some traumas of my own. I was commissioned by a middle-market newspaper to write about top City women. The upside was that I met some fascinating women, the downside was that the fearful and feared female editor demanded a more voyeuristic style than any financier would ever countenance. "I want anecdotes. I want colour," she shrilled. "When did they buy their first BMW? Did their husbands leave them because they worked too hard? Are their days fulfilled but their nights lonely? Bring me stories about their mansions, their cavernous wardrobes, their Colefax and Fowler-lined underwear drawers." A friend chortled: "Abigail, Im afraid its the irreconcilable clash between business and tittle-tattle."
I was not surprised when a very senior woman at a US investment bank put her Ferragamo clad foot firmly down and refused to cooperate further. The editor dropped her from the feature. The Credit Suisse women, however, endured my questions with good humour and patience. I was highly impressed by Susan Kilsby, chairman of the European mergers and acquisitions group; Nicki Dobinson, co-head of European equities cash trading; and Marisa Drew, co-head of European leveraged finance origination. It is a tribute to Credit Suisses culture that the firm has more than one token woman at the top.
A source whispers that if Prince were forced out, Bob Rubin, chairman of Citis executive committee, will be asked to step in as a temporary chief executive. Rubin is extremely highly regarded by those who have worked with him. One former Goldman colleague insisted: Rubin is the best risk manager on the street
Chief executives who still had a job were out in force for the annual IMF-World Bank meetings in Washington in October. Their mood can best be described as gloomy verging on the grumpy, and underlings had to tread carefully. "Kens testy," a mole whispered. Mole was referring to Ken Lewis, Bank of Americas chief executive, who the day before had delivered a disappointing set of third-quarter results. At the World Bank reception, I spotted senior bankers Paul Hearn of BNP Paribas and Michael Ridley of JPMorgan deep in conversation about the treacherous volatility of month-end revaluations. Ralph Berlowitz and Bill Northfield, Deutsche Bank managing directors, were more sanguine. However, these gentlemen look after Deutsches sovereign and supranational business, which must be booming in this risk-averse environment.At the Euromoney reception, where Brazilian Henrique Meirelles was named central bank governor of 2007, I had a long conversation with the engaging and ebullient René Karsenti, executive president of the International Capital Market Association. René reminded me that I had been pessimistic when we last met at ICMAs annual general meeting in June. "René," I said. "Im a perma-bear. Im more interested in knowing if you are a bear." Renés response was an enigmatic smile and an invitation to attend ICMAs 2008 annual general meeting, which will be held in Vienna.