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Goldman Sachs is coming for its $400k salary bankers, Deutsche can hire them. The nicest bankers on Wall Street may just be pretending to be friends




Can you really call something a “layoff round” if it’s more like a “rounding error in layoffs”? The Wall Street Journal and Financial Times cite “people familiar with the matter” as saying Goldman Sachs is considering “fewer than 250” positions. A quick bit of finger math suggests that if you take an employee base of just under 40,000, and assume the average staff turnover time is twelve years, then 250 jobs represents less than a month of normal attrition. In all likelihood, more than 250 people leave Goldman Sachs each year to launch podcasts.

The fact that such a small reduction in the number of employees is being bothered by people in the journalists̵[ads1]7; contact books suggests, of course, that these will not be average employees. The FT article suggests that the jobs eliminated would be “primarily at senior level including CEOs”. A Goldman Sachs MD, according to the information the company files for the H1-B program, earns a base salary of $400k to $500k. When you factor in bonus plus property costs and other ancillary costs, that would mean a fully loaded cost per MD of somewhere between $1.5m and the-sky’s-the-limit.

Even though the job cuts were incredibly heavy, it is still difficult to move the disc. If we were to assume the average person cut cost $1 million each, that would be about a 1.5% share of the total compensation line, based on the Q1 run rate, although that would represent significant progress against COO John Waldron’s promise of investor day to “unlock” $1 billion to reinvest back into the core business.

The real problem with firing CEOs, though, is that it’s very hard to ignore the fact that you’re firing both revenue and costs. At the MD level, most bankers have significant personal franchises, and getting rid of even a single hundred of them would be something the company would notice. Making senior-level cuts is usually an indication that senior management believes the deal drought is going to last longer and that it is better to take the pain early. The FT says Goldman is already considering a third round of layoffs in September.

But as they say, differences of opinion make horse races. Deutsche Bank apparently sees the current downturn as an opportunity to rebuild a franchise that suffered during the cost-cutting years and has consequently gone on a “hiring spree”. Of course, there is no standard international definition of a “spree”, and in fact corporate and investment banking head Fabrizio Campelli talks of hiring “close to 50” hedge bankers so far this year, with “investments in technology, selective hiring and further growth initiatives” to come .

But at this point in the cycle any growth is welcome and Deutsche also pays roughly $500,000 basic to MDs. It is even possible that both banks are right, from the perspective of their own business plans and starting positions.

Elsewhere, Centerview Partners used to be known for its unusually happy juniors, extremely high compensation, and general atmosphere of “trusted advisor” banking. It was often perceived as the kind of place where people hung out and had intellectual discussions with each other and said “good idea” in wood-paneled offices.

And all that may still be true, but the latest lawsuit involving former partner David Handler has revealed that it’s also a place where people get really pissed off about money and status, just like they do anywhere else. The lawsuit appears to overturn an old Hollywood cliché — that a verbal contract isn’t worth the paper it’s written on.

Once upon a time, Handler was recruited to be one of the first non-founders of Centerview, on a deal that gave him an extremely lucrative percentage of the revenue. Sometime later, he and Centerview renegotiated that contract to be slightly less lucrative, in exchange for a stake in the firm’s equity. But the new contract was never signed, due to squabbling over fairly typical employment contracts. And then Centerview hired a few new tech bankers whose franchises overlapped with Handler’s and things turned into what could simply be described as “one hell of a mess.”

The lesson seems pretty clear – no matter how friendly everything is and how satisfied you feel with a gentlemen’s agreement, get it all in writing. A little awkwardness now can save a lot more trouble later.

Meanwhile …

Tyler Dickson, co-head of Citigroup’s banking, capital markets and advisory unit, says he is cautiously optimistic about an end to the deal drought in the second half of the year, as boards and CEOs become more comfortable with the level of risk after the debt ceiling. struggle in Congress. Of course, talk is cheap and optimistic views don’t count until they’ve turned into a hiring party. (Bloomberg)

FIG bankers, on the other hand, cannot see much light at the end of the tunnel; the fact that accounting rules require assets to be marked to market on acquisition, combined with a rising interest rate environment, has probably set things back by two years in Europe. (FT)

An unusual move by UBS/CS in Asia – they are offering some bankers bonuses based on net new money generation rather than fees, which private banks are usually reluctant to do for fairly obvious reasons, but could certainly steady the ship in terms of bring the customer’s money back. (Finews)

Dina Powell is leaving Goldman Sachs, but not exactly leaving the alumni network — she’ll become vice president and president of global client services at BDT & MSD Partners, the firm run by fellow former Goldman bankers Byron Trott and Greg Lemkau. (WSJ)

Fred Baba, one of the youngest partners at Goldman and the author of a viral memo around the time of the 2020 murder of George Floyd, is leaving the firm. He apparently talks to Jane Street and other systematic trading powerhouses. (Bloomberg)

Bankers choose to walk off rather than comply with five-day office work guidelines. As long as firms like Deutsche and HSBC are happy with three days, there will always be alternatives. (Financial News)

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