Morning Coffee: Morgan Stanley's CEO contender says rival's business not going well. Why Jamie Dimon might actually run for President
The timing is surely coincidental, the inference almost certainly unintentional but the overall effect is undeniably hilarious. A few short weeks after James Gorman announced his intention to step down from the post of CEO at Morgan Stanley, one of the key contenders for the succession got the chance to stand up at an investor conference and tell the world that his business unit is doing very well, but his main rival’s business is doing quite badly. If you had tried to write something like this in a prestige television drama, the script consultant would have thrown it back at you for being a bit too hacky.
The succession candidate with the smile on his face is Andy Saperstein, the head of wealth management. When it comes to his business, he’s talking about doubling assets under management to $10trn, and growing pretax earnings from $6.6bn to $12bn. While he was there, he mentioned that things weren’t so great for rival Ted Pick’s trading business lines, where “results will be notably down year over year versus a strong second quarter last year”. Investment banking is also “very challenged,” Saperstein noted. That falls under Pick's purview too.
The problem appears to be that the predictions of analysts like Matt O’Connor of Deutsche Bank at the start of the year were correct. The deal drought is continuing, the “dry powder” remains unlit and unlike last year, there isn’t any offsetting effect from the super-normal fixed income trading profits which the banks made as the interest rate cycle changed. Although some executives are getting more optimistic, this is mainly because gloomy bankers don’t get mandates rather than anything based in fundamentals, and in any case, deals initiated just before the summer break are not likely to reach fees-paid stage until 2024. The year of 2023 can more or less be written off for compensation purposes, and many banks are beginning to lay off staff to prepare for a long winter.
But does this mean that ambitious heads of Institutional Securities Groups should also be writing off their chances of the top job? That feels like it would be premature. Succession planning at a major global bank is much more than a “who’s got the best divisional earnings” sprint race. In many ways, the better Wealth Management performs, the more likely the board may be to conclude that Andy Saperstein is personally indispensable to the strategy and can’t have his attention diluted.
Elsewhere, Bill Ackman has been putting his Twitter subscription to good use with a mammoth extended tweet explaining why he thinks Jamie Dimon should be the next President of the USA. It’s certainly an early endorsement; Dimon hasn’t actually said he’s running, or even given anything more than the coy hints about “serving my country” that he’s made in previous election cycles.
Historically, JD’s public comments on political matters have often been walked back quite quickly. But if he’s getting more positive feedback this time, he might also consider that there’s a personal finance angle to it. Back in 2018, when he commented that he would probably be able to beat Donald Trump, it was noted that his contract at the time provided for rapid vesting of deferred compensation awards if he took a public service job that would require divestment of assets to comply with conflict of interest requirements.
Since then, he’s had a lot more deferred stock awarded, and the outlook for bank industry shares is not necessarily quite as bright. If the quick-vesting clause is still there, he might be more tempted to think about the attractions of a job where you only have one Vice-President rather than several thousand.
Meanwhile …
Demonstrating the difference between the kind of language used in different parts of the buyside, long-only asset manager PGIM is saying that it’s looking at using ChatGPT to automate “some of the tedious tasks for junior employees” … (Financial News)
… while hedge funds are apparently “deploying it to handle all the grunt work”. The actual tasks – summarizing research, preparing tables from reports and looking for anomalies in standardized data – seem quite similar. (Bloomberg)
BlackRock, on the other hand, is spending “a huge amount of time” on AI and how it will reshape the business, and is hiring specialist coders, but Larry Fink’s conference speech didn’t give any examples of workflow which had been automated just yet. (Business Insider)
Presumably no final decisions will be taken on Presidential runs until the very serious disagreements have been resolved between Jes Staley and Jamie Dimon about precisely what conversations, at what times, the two bankers had about Jeffrey Epstein’s accounts. Dimon’s deposition is quite clear that he “had never even heard of the guy, pretty much” and that no such talks took place. (WSJ)
Cowen Digital is closing down, as its parent has been acquired by TD Bank, which isn’t particularly interested in providing clients with crypto trading… (Bloomberg)
… but this still seems to be against the prevailing trend; incumbent Wall Street firms like Schwab, Nomura and Standard Chartered are still seeing an opportunity for their digital assets teams in the decline and fall of “less-regulated” exchanges. (FT)
Why aren’t workers coming back to the office? Although answers like “it’s horrible” and “is this some kind of joke” are not uncommon, workers surveyed by the WSJ also suggested that childcare costs are underrated as a financial incentive not to be in the office all the time. Some workers also pointed out that Zoom is now integrated into a lot of people’s schedules – it’s strangely demoralizing to take an expensive and unpleasant commute for an hour, sit around for five long video calls, and then take the same commute back. (WSJ)
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