Morning Coffee: The Goldman Sachs analyst who worked at a supermarket to meet real people. Banks are heading for a crisis that only boomers will recognise
It’s pretty unusual to find a junior investment banker in a supermarket at the weekend. This is partly because it’s unusual to find a junior investment banker anywhere outside the office at the weekend, but also because if they do have some free time, they’ll usually spend it doing something more glamorous. Mohammed Zina is apparently built different. When he joined Goldman Sachs in 2014, he kept his weekend job at Sainsbury’s.
This wasn’t some kind of “Michael Grimes picked up some rides for Uber” marketing stunt either. Zina wasn’t pitching capital markets or advisory business; he just wanted to keep it real and “missed working with ordinary people”. His weekday job was in the “EMEA Conflict Resolution Group”, which sounds more exciting than it is – rather than trying to mediate and peacemake internal turf wars and personality clashes, it monitors and manages conflicts of interest and reputational risks.
In the course of that tricky but necessary job, a situation apparently developed in which Mohammed Zina found himself accused of insider dealing charges. The trial is still going on – closing statements were yesterday – so we shouldn’t talk too much about that except to note that last week the judge ruled that his brother, Suhail Zina, had no case to answer and should be acquitted.
What’s interesting, though, is that the Zina brothers were very much at one end of a spectrum when it comes to the relationship between successful bankers and lawyers, and the communities they grew up in. Typically, when someone has come from a humble background and reached a highly-paid job in finance, they will go one of two ways: either they will never stop talking about their roots, or they will do their best to forget and deny them.
There’s all sorts of psychological and sociological pressures at work; some people want to fit in, some want to be admired for their achievements. Some people had a happy time growing up and some didn’t. But what’s really unusual is for a banker to not only talk nostalgically about “real people” and communities, but to actually want to spend time with them.
Spending time among real people has the potential to become a perk in financial services. A growing number of firms have actual DEI targets to increase the number of “blue collar” or “working class” representatives in their senior ranks. Cynics might say this is open to abuse – ambitious VPs telling the promotion board that they “grew up on an estate” and similar.
Perhaps there will need to be some requirement to actually be connected to blue collar roots in some way. Not necessarily literally working there at weekends, but it ought to be possible to collect testimonials like those given to the Zina brothers by members of their community. If someone’s school friends still talk favourably about them (and if the school wasn’t Eton), then that’s got to be a good sign.
Separately, and of more immediate relevance, it appears that we might be about to get a really graphic illustration of a market proverb. “Every crisis happens again, as soon as everyone who remembers the last one is retired or dead”, as the saying goes. So now, the office block in Canary Wharf where Bear Stearns used to be based has been sold at a 60% loss. The New York Community Bank has been downgraded to junk because of fears of loan losses. It looks like we might be in for a good old fashioned commercial real estate crisis.
This really is something that only bankers who don’t understand TikTok will remember. The last really serious losses on mainstream OECD commercial real estate were in the 1980s. And they were so bad that plenty of banks were scared out of CRE lending altogether for decades. After that, we had the years of zero interest rates, during which more or less everyone could service their debt and property values kept rising. It’s been a long time.
Consequently, only a very few, quite mature bankers will have experience in what to do when a big loan on a big building gets into trouble. Younger ones might want to start googling phrases like “change of valuation basis”, “non-disturbance agreement” “debtor in possession” and the like. None of them are good news.
He’s famously a champion canoeist, but that doesn’t mean Julian Salisbury wants to paddle his own canoe. In his first interview after joining Sixth Street Capital, he explains that setting up an asset management business involves dedicating a huge amount of time and effort to logistics, compliance and even real estate, whereas picking up an oar in a well-run existing franchise means that he can “wake up every single day thinking about investing and generating great returns … that’s all we do”. This is actually slightly different from the advice he used to give at Goldman, where he used to emphasise the importance of doing different things and getting a variety of experience. (Institutional Investor)
Now that Bao Fan has left China Renaissance, it might be possible to make progress on the takeover offers that were flying around during the period of his “disappearance”. Lots of employees have already left, but the firm still has valuable regulatory licences. (Bloomberg)
There’s a new AI-powered chatbot on LinkedIn; although, if you need a large language model to assess how well a job opening matches your skills, that might be a sign that the job’s not for you. (WIRED)
Carlyle is going to make bankers eat what they kill; the proportion of compensation related to fixed fee revenues is falling, while the share related to deal exits is rising from 47% to somewhere north of 60%. (Bloomberg)
Because of the recovery in crypto prices, it looks like FTX customers are going be paid back in full. But because of that same boom, they are even more angry at having the dollar value of their claims fixed as of the bankruptcy date. (WIRED)
It hasn’t been strictly true that bankers are barred from membership at Soho House or its network of members’ clubs, but there’s still likely to be a bit of schadenfreude at its current short-seller trouble from anyone who was turned away in the 00s. We’re not just saying this because we’re bitter, by the way. (Bloomberg)
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