Bank of America is surprisingly nimble. No sooner did it turn in some so-so results in sales and trading (and especially in fixed income sales and trading, where it was the only bank so far not to register an increase in revenues last year) and no sooner did we suggest that it might want to make some changes, than it's announced a full reorg of its fixed income trading division. How's that for responsive?
Clearly, the likelihood is that Bank of America was well aware for a while that its fixed income revenues were stagnating while everyone else's weren't and that this change was in the pipeline for months. Even so, BofA's shuffling of its pack looks timely. Frank Kotsen, the global head of credit is going ('decided to leave') after 23 years. He will be replaced by Brian Carosielli (currently the global head of mortgages and securitized-products trading) and Brian Weinstein (currently the global cohead of emerging-markets trading). The two men will run a newly-named, 'global credit group.'
With Carosielli and Weinstein now in charge, there will be some backfilling of their jobs. It's not clear who's replacing Weinstein, but Carosielli's old seat will be occupied by Matt McQueen, currently the global head of mortgage trading. There's also a nod to the importance of data in the new decade with the appointment of Mark Davies (formerly co-head of global emerging markets FICC trading) as head of 'global markets data management.' Davies' purview includes 'realigning' the data strategy and working on data 'remediation,' which suggests that things are both out of alignment and require remediating.
Will this be enough to get BofA growing again? Hopefully, although an uncharitable reading might simply interpret the changes as a response to Kotsen's decision to retire after the 2020 bonus round. It's worth noting though, that across sales and trading, success is now less about star traders doing starry things and more about having excellent electronic trading platforms. At Morgan Stanley, where revenues in fixed income sales and trading rose by 11% year-on-year in 2019 as a whole and by a massive 125% in the final quarter, the former head of fixed income trading - Rob Rooney - is now in charge of technology, and has been conducting a massive reorg of the technology team after a push to 'electronification'. Shuffling traders will start to address the problem, but it's getting the technology right that will really resolve it.
Separately, while Goldman Sachs is still early in its adventure of becoming a platform-based business with a steady flow of revenues generated at low marginal cost from things like online retail banking, Morgan Stanley is a long way down a similar but slightly different road. The Financial Times notes that Morgan Stanley CEO James Gorman set out to reorient the bank towards stable revenues in wealth management a while ago, and that it just turned in a set of record revenues and earnings. Moreover, Morgan Stanley yesterday increased its long term return on equity target to 17%, while Goldman Sachs is currently on 10%. Goldman people might wish they had been run by an ex-McKinsey consultant for the past 10 years too.
Morgan Stanley's 125% fixed income revenue growth in the fourth quarter of 2019 (vs. Q4 2018) comfortably beat all rival U.S. banks. (Financial News)
JPMorgan also has a stronger 'platform' than Goldman Sachs thanks to its existing strong consumer banking business. (Financial Times)
Barclays' MD cuts include Jonathan Kitei, head of securitized product sales for Americas, and Tim Johnston, head of EMEA cash high-touch trading and sales. (Bloomberg)
Leon Black, ruthless founder of private equity firm Apollo Global Management, has a sad backstory. Black had a passion for philosophy and Shakespeare at Dartmouth College and didn't plan to go into finance. Then his father committed suicide and everything changed. “My father was God to me. And then he committed suicide. Suicides, you know, aren’t usually committed by gods...It took me years of therapy to get over that and to figure out where he ended and I began.” (Bloomberg)
Dixon Boardman, a hedge fund manager who married a princess 30 years younger than him, wants to raise $100m for a biotech fund. (Financial Times)
Qatar-backed private bank Quintet wants to hire 100 relationship managers. (Financial Times)
Left to their own devices, trading algorithms try to hide their true natures and engage in other human-like activities. (The Conversation)
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